B.C. minister briefed on HST before election

B.C. government bureaucrats were engaged in discussions about the HST with their federal counterparts — and briefing the provincial finance minister — well before the May 2009 provincial election, documents show.

The information, which appears to contradict claims by the Liberal government that the harmonized sales tax was not on their radar before the election, was revealed in government emails and briefing notes obtained by CBC News and other media outlets through a Freedom of Information request this week.

The documents also reveal the government had expert advice that the new tax might hurt the province's unemployment and economic growth for up to five years before the benefits were realized.

The documents also appear to support, however, B.C. Finance Minister Colin Hansen's assertions that the Liberal government did not actually decide to bring in the new tax until bureaucrats briefed him on the province's financial future after the May 2009 election.

Deal struck after election

The Liberal government struck the deal with the federal government to bring in the 12 per cent HST immediately after winning the election. It was announced on July 23, unleashing widespread protest that eventually led opponents of the tax to collect about 560,000 verified signatures on a petition to repeal the tax.

The 140 pages of documents show that while the HST was being discussed at the highest levels well before the election, the impetus came from the federal government, and B.C. was reluctant to sign on — in part, it would seem, for political reasons.

One briefing note prepared by senior bureaucrats for a first ministers meeting in Ottawa on Jan. 16, 2009, says the federal government is encouraging the provinces to harmonize their sales taxes, and that while B.C. recognizes the benefits, it is concerned about shifting the tax burden from business to individuals.

It also notes "a lack of support from some business sectors, the need to protect low-income individuals and families from tax increases, and the need to ensure adequate provincial revenues."

Then a second briefing note prepared for the minister, Colin Hansen, on March 12 — a month before the election campaign began —  said B.C. will likely be asked about its position on harmonization in light of the expected announcement from Ontario.

It spells out both the possible benefits and downside of the HST in candid terms, quoting a study by the C.D. Howe Institute.

It says the study "suggests that, while the long-term economic gain from harmonization is relatively clear, harmonization will cause a short-term loss in GDP and unemployment .… 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." 

That's a far less optimistic view than the one expressed by the minister in his public comments. He has repeatedly said experts call the HST the single biggest thing the government can do to boost the economy.

Discussion through election campaign

The discussion among senior bureaucrats in Victoria and Ottawa continued through the winter and spring and into the election campaign, but it picked up steam when the Ontario government said in its March budget it would adopt the HST.

This set off alarm bells in Victoria that investors would be lured away from B.C.

In a flurry of emails written in March and April, the B.C. bureaucrats ask whether Hansen has taken any position on the HST and suggest some "options." All of the options he was given in the document, however, were censored before the documents were released.

On April 26, during the election campaign, the Liberal Party was asked in a questionnaire from the B.C. Restaurant and Foodservice Association, "Will your party oppose harmonizing GST with PST in British Columbia?"

The party official response was "…A harmonized GST is not something that is contemplated in the B.C. Liberal platform, but we are committed to improving the tax system."

Rate cut leads to final deal

There are more heavily censored emails exchanged between ministry bureaucrats during the campaign. Then, on May 11, just the day before the election, there is what appears to be a critical exchange of emails between two top bureaucrats, the assistant deputy ministers of finance in Ottawa and Victoria.

The comments of the federal bureaucrat have been censored, but his provincial counterpart in B.C. writes, "Am I correct in assuming a province could now start at a rate other than 8 per cent?" perhaps referring to a deal to allow B.C. to roll out the harmonized rate at 12 per cent in BC, not 13 per cent as in Ontario. 

In public, Hansen has said he only agreed to adopt the HST when the federal government agreed to the lower rate and to give B.C. $1.6 billion in transition funds.

After the tax was introduced, the Liberals came under fire for not mentioning it during the election campaign and were accused of keeping plans secret from the public. 

On Aug. 25, 2009, however, Campbell insisted it was not in their plans during the election.