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VICTORIA - The British Columbia government sold its switch to the harmonized sales tax as one of the best moves it could make to improve the province's economy, despite being told about potential long-running negative impacts of the HST, according to newly released documents.
Finance Minister Colin Hansen's bureaucrats handed him a briefing document in March 2009 — one month before the start of the spring election campaign — that suggested the HST could hurt the economy for up to five years before the province would see the benefits.
Documents released Wednesday reveal the HST debate was raging within the inner circles of government prior to the 2009 election, which saw the Liberals re-elected to a third consecutive term. During that campaign, the party didn't say it would switch to the HST and in one instance said the tax wasn't part of its platform.
The Liberals have been in political hot water since their July 2009 announcement to adopt the HST.
Many British Columbians, the Opposition and former premier Bill Vander Zalm, who launched a successful petition to challenge the tax, accuse the Liberals of hiding their intentions to introduce the HST during the election campaign.
The Liberals, including Hansen, have consistently said the tax wasn't on the government's radar during the campaign.
Hansen confirmed Wednesday he briefly examined the HST briefing document in March 2009, but did not seriously consider adopting the tax until after the May vote.
"I didn't spend a lot of time on it, actually," he said.
The briefing document to Hansen cites a September 2008 CD Howe Institute commentary that examined Ontario's plan to adopt the HST, which was announced in March 2009 — four months before British Columbia followed suit.
The CD Howe report concluded the HST would have long-term economic gain, but it warned harmonizing provincial taxes with the federal goods and services tax would cause short-term loss in gross domestic product and unemployment.
"Part of the reason is that the negative effect of higher consumption taxes occurs faster than the positive effect of lower taxes on investment goods and exports," said Hansen's briefing document. "The study suggests that it may take five or more years before the impact on GDP is positive and even longer for real wages and job numbers to recover."
Hansen said staff in his ministry were researching the possibility of switching to the harmonized sales tax on their own accord, something that dates back to the 1990s and other B.C. finance ministers, including Carole Taylor and Gary Collins.
"They were doing what they normally do, and that's to collect information about tax policy issues," he said. "And when Ontario made their decision to go the HST, they did their due diligence and gathered information."
Hansen said the bureaucrats were doing their HST research without political guidance.
"Nothing that was ever done on the HST file by public servants was done at the request of anybody at the political level," he said.
Hansen made similar comments about the work habits of his ministry's bureaucrats last spring when documents obtained under federal access-to-information laws revealed B.C. Finance Ministry staff approached their federal counterparts about the HST three days after the May 12 provincial election.
Hansen said the newly released HST documents aren't evidence his government was considering the new tax prior to the election.
Hansen said the B.C. Liberals moved towards the HST after discovering the recession had crippled the province's revenues and helped create a record budget deficit.
Ottawa offered the B.C. government $1.6 billion to adopt the HST, which took effect July 1.
Opposition New Democrat leader Carole James said she doesn't believe Hansen when he says he never examined the briefing document in detail prior to the election.
"I don't think it's plausible at all," James told reporters in Victoria.
"I don't think the public can believe anything from this government. Since the whole HST mess started, they've tried to avoid telling the truth: 'It wasn't on our radar screen.' Well, it's very clear it was on their radar screen."
She also said she can't believe the government went ahead with the HST when it had information the tax could hurt the economy for years.
"When you're in a difficult economic time, when you're in a recession, when we haven't seen the tentative signs of recovery, a tax that's going to going to discourage consumer confidence, going to slow down our economy, slow down our growth — why would you bring in that tax?"
