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When governments give the people power to overturn unpopular decisions, results can be unpredictable, inconvenient and sometimes even bad public policy.
The decision by voters in British Columbia to scrap the unpopular Harmonized Sales Tax is all of these. The first of the consequences of this taxpayers’ rebellion became immediately obvious when the federal government noted that it intends to claw back the $1.6-billion incentive it gave the province when it adopted the tax in 2009.
That is just the start of it. Economists generally see the taxation as a means to build productivity, but that incentive has been neutralized. As B.C. moves back to a provincial sales tax, along with the ever-unpopular federal GST (which voters were not given an opportunity to vote on), economists say the disadvantages to manufacturing will once again return.
Ironically, the decision is a boon to wealthy Albertans looking to buy recreational property in eastern B.C. As one realtor said, “For businesses, the HST’s a good tax. But for recreational property, it’s a disaster.”
The service sector, too, is not unhappy to see the tax go, even if will take 18 months to unravel. Much of the antipathy towards the HST was rooted in its visibility in day-to-day commerce. As one B.C. resident complained, part of the aggravation of the HST was the annoying five-per-cent tax “on haircuts, liquor purchases, travel tickets and restaurant meals.”
And this, perhaps, is at the root of this northern tea party. As much as the HST makes sense in economic theory, it was ill-conceived, incompetently introduced by former premier Gordon Campbell, its benefits not well explained and – perhaps the piece de resistance - belied the stated objective of tax neutrality by creating a tax surplus. Meanwhile, businesses that were expected to pass along whatever savings they realized never really got around to doing so.
The lesson of this sorry exercise is simple: Even the most sensible public policy changes do not stand on their own merit. In a true democracy, voters need to understand the need for such changes and need to buy in. This puts the onus on a government to communicate clearly and to listen even better. Had Campbell’s Liberals done a better of job of that, the HST might yet exist in B.C. And the Liberals under the luckless Premier Christy Clark might not be a dead party walking to an electoral execution.
Never mind that B.C. and indeed the rest of Canada’s provinces will in all likelihood one day have a tax very much like the HST. At this point, what really matters is that Canadians want any such move to be made on their own terms.
Much as the politicians may hate it, the recall legislation did its job: It gave the common voters a chance to rebel against a decision that appeared arbitrarily imposed by legislators heady with their own sense of importance. This plebiscite gave B.C.’s people a rare chance to stymie such arrogance. And that, importantly, is a very significant signpost on the road to enhanced democracy.