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June 27, 2010

Stamping the HST

You won't be hearing about this from Canada Post, but the cost of mailing a letter in BC will increase by 7% on Canada Day, when postage becomes subject to the HST. A first class letter costs $0.57 to mail in Canada, plus 5% GST for a total of $0.60 which becomes $0.64 with the HST. Quick, send your thank you letter to Gordon Campbell by Wednesday, June 30th; better yet, stock up on stamps and beat the HST.

It is hundreds of irritants like paying tax on stamps that will make the protest against the HST grow once people start seeing how it really hurts their budgets. Treat yourself to lunch out on Wednesday because it will cost 7% more on Thursday.

Economists don't have much credibility; how many predicted the global economic meltdown? Lining up endorsements from the Fraser Institute isn't going to help the government's credibility. It was amusing to see the confusion caused when the Times Colonist published the results of its HST analysis which used Statistics Canada's social policy simulation database and model at the same time the Fraser Institute was trying to spin the government's line that the tax will barely be noticed. It was tempting to enter into that debate, but a wise politician once remarked that "they don't shoot at dead ducks". It is boring to read explanations of different economic models, especially when all that is necessary is to wait a few days until people start paying more for postage, coffee, haircuts, ... No wonder the government has no credibility.

Once the anti-HST petition is handed in to Elections BC on June 30th, there will be a four and a half month interval until the recall process can begin on November 15th. Recalls are difficult, but almost equally difficult for the anti-HST campaign will be the challenge of maintaining momentum between submitting the petitions and beginning recalls. No longer will the public be treated to weekly updates on the number of signatures petitioners have gathered. It is not easy to generate news stories several times a week, or even weekly, unless something new is happening. That is one of the reasons it is strange that the government seems intent on keeping the story alive by launching an advertising campaign in an effort to convince 80% of British Columbians that they are wrong and the government knows best.

There probably will be stories in early July on how people are reacting to the tax and whether businesses are fully passing it on or reducing prices to absorb any part of it. We already know that government liquor stores are going to mark up prices so as to eliminate any savings from tax changes, and postage rates aren't going to go down because of anything Canada Post may save as a result of HST input rebates.

Campbell likes to say that the HST will stimulate investment, although he can't say why his 2002 elimination of the sales tax on "production machinery and equipment" didn't produce measurable results. Statistics on business investment by province are only produced on an annual basis; it will be the spring of 2012 before preliminary data are available for 2011.

Monthly data are available on two key indicators that are likely to show movement as a result of the HST. At the end of each month, Statistics Canada releases data on food services and drinking establishments showing total food service sales by province. It is interesting to note that Statistics Canada gets those data as a byproduct of Canada Revenue Agency's administration of the GST/HST. Those data come out two months after the fact, so the figures for July will be available at the end of September. Every month after that, eyes will be on the Statistics Canada reports to see whether the food services industry is getting hit as hard as the $750 million loss predicted by the Canadian Restaurant and Food Services Association.

Statistics Canada also releases monthly data by province on components of the consumer price index. It will be interesting to watch how the provincial indices for BC and Ontario change relative to the indices for Alberta, Saskatchewan and Manitoba over the next few months. The Campbell government, and its friends at the Fraser Institute, contend that businesses will pass their $2 billion in annual savings through to consumers, although we already know that government services like liquor stores and Canada Post won't do any such thing. It will soon be time for making claims about the HST to end and for measuring its consequences to begin.