The Government of British Columbia will hold a referendum to approve new transportation infrastructure for Metro Vancouver. Voting will be from March 16 to May 29, 2015 on the following question: “Do you support a new 0.5% Metro Vancouver Congestion Improvement Tax, to be dedicated to the Mayors’ Transportation and Transit Plan?”
The referendum question proposes that a new regional sales tax of 0.5% (on the majority of goods that are subject to the Provincial Sales Tax) be created to fund future growth in transportation infrastructure. The provincial government has indicated that should the referendum pass, it will introduce the enabling legislation in the next session of the legislature.
RCC is concerned about:
- The precedent for more of the 709 Canadian municipalities1 to introduce such a tax – and the borderline issues that that tax advantages/disadvantages will create between merchants in neighbouring communities.
- The propensity of consumption taxes to increase from their initial rate.
- The burden of the implementation cost, borne by the retail sector – which in B.C. has in the past two years borne the new cost of stewardship of packaging and printed paper, and organic materials and the adoption then cessation of the Harmonized Sales Tax.
- The lack of discussion concerning compensation for retail stores impacted by construction of new transportation infrastructure.
Retail is supportive of the need for new infrastructure (bringing our goods, customers and employees to our stores) while favouring funding methodologies that do not disproportionately impact retail over other business sectors.
The referendum is supported by the B.C. Chamber of Commerce, the B.C. Business Council and the Vancouver Board of Trade. It is opposed by the Canadian Taxpayers’ Federation.
Oppose the proposal as currently configured, i.e., a distinct rate and base, per recent comments from the Government that the goods covered and the process will be different than those under either the PST or GST, while remaining open in principle to new revenue tools for infrastructure funding.
If the proposal is not headed for outright defeat in the referendum, press for the following measures:
- The harmonization of the proposed regional sales tax with the B.C. provincial sales tax to reduce additional administrative burden and cost.
- A statutory limitation on any increases in the regional sales tax, or new sales taxes in other regions, requiring approval through a referendum.
- Compensation for retail merchants from impacts resulting from both the adaptation of in-store and on-line systems, and also, any impacts from disruption due to construction of new transit lines.
Retail Council of Canada (RCC) has spoken with both Ministry of Finance and Ministry of Transportation and Infrastructure officials.
Government is expected to decide on the methodology for the regional sales tax prior to the official launch of the referendum campaign.
- Continue to educate both the general public and governments on the negative impacts of multiple sales tax regimes, including additional filing requirements and administrative costs to collect a third tax.
- Continue to educate both the general public and governments on the negative impacts of the B.C. provincial sales tax (principally the lack of input tax credits and the administrative burdens surrounding sales tax exemptions).
- Work with other organizations that hold similar or common positions on this issue.
Metro Vancouver is suffering from increasing traffic congestion as a result of continued significant population growth from the 2006 population of 2.2 million to 3.4 million in 2041. As there is very limited space for new subdivisions, most of the population growth will be achieved through densification of existing neighbourhoods.
The B.C. Government, presumably wanting to shield itself from criticism about decisions concerning the geographic location of new transit lines, local construction costs and impacts, tasked Metro Vancouver’s 22 Mayors (the “Mayors’ Council”) with creating a plan for the construction of new regional transportation infrastructure and for financing the local portion of the cost. This is partly because British Columbians outside Metro Vancouver resent the obligation to shoulder the very significant construction costs. It is also because past Governments have been subject to significant criticism over the construction costs and locations of new transit lines.
The Mayors created a plan to replace a significant north-south arterial bridge over the Fraser River (Pattullo Bridge between New Westminster and Surrey), to partially construct a new east-west subway in Vancouver (the “Broadway Line” between Commercial Drive and Arbutus Street which would eventually link UBC to rapid transit), new light rapid transit principally serving Surrey (but also touching Delta, White Rock and Langley) and new “rapid bus” lines.
Mayors initially favoured new and increased congestion charges, gasoline taxes and a regional carbon tax but the B.C. Government made it clear that those options were not acceptable to the senior level of government. Accordingly, Metro Vancouver’s Mayors proposed a 0.5% increase in the Provincial Sales Tax in Metro Vancouver. The Provincial Government, wanting to shield itself from involvement in increasing taxes, particularly following the introduction and repeal of the Harmonized Sales Tax, has decided that the tax would be implemented as a separate line (the “Metro Vancouver Congestion Improvement Tax”) and that it will be applied to a “similar” but not identical basket of goods and services as the Provincial Sales Tax.
We oppose the proposed “third tax” approach without being opposed to new funding for infrastructure. The government has only recently campaigned on the virtues of moving to a single sales tax from two, a big advantage of which is the decrease in the administrative burden and the cost of collection. Now, it may be supporting moving from two distinct sales tax regimes to three.
There are also examples of increased complexity: there is the reprogramming of cash registers, tracking goods and returns for tax filing purposes, training staff on an ongoing basis and reworking online checkout offerings – this after two similarly jarring changes within the past five years. We would ask the question as to what happens to goods bought on one side of the line and returned on the other. Does a customer get back less tax than they paid in some cases and more than they paid in others? What requirements will exist for merchants selling online or over the telephone, i.e., will the applicable tax be that in the location of the store or in the location where delivered? These are just two examples of the complexity that can arise.
The new regional sales tax will be in addition to four current “taxes” for regional transportation: (1) a regional gas (“Motor Fuel”) tax of 17 cents per litre, (2) a regional off-street parking (“Parking Rights”) tax of 21%, and, (3) regional transit levy on Hydro of $0.06240/day, and, (4) property taxes.
Lessons Learned from HST Referendum
RCC was part of a large coalition of business organizations in favour of implementation of the Harmonized Sales Tax. Proponents had limited impact upon the 2011 referendum as the public discussion was hostile to the HST, and the media was focused on the opponents to the HST. As reference and perspective the following activities were pursued:
- Member education
- Responsive media engagement to educate the public
- Partnering with the coalition
For further information, please contact Greg Wilson, Director, Government Relations (B.C.) at (604) 730-5254 or [email protected]
1That is 709 municipalities with populations above 5,000, according to the 2011 Census. There are 33 Census Metropolitan Areas (100,000+ pop.) and 113 Census Agglomerations (10,000+ pop.).