Doomsday B.C. HST scenario 'unrealistic'

A scenario showing a $5 billion hole in the B.C. budget if the HST is rejected is unrealistic, says the B.C. NDP finance critic — and the province's finance minister agrees with him.

Internal provincial government documents lay out a number of grim scenerios, the worst of which shows that if the HST is eliminated and the PST is not reinstated, personal income taxes would have to nearly double, fuel prices would have to increase six-fold and property taxes would have to be almost eight times higher.

None of that is likely to happen, said NDP finance critic Bruce Ralston.

"They sketch out a bit of a doomsday scenario," Ralston said. "I don't think that anyone ever thought that if the referendum says that the HST goes, that the PST wouldn't be reinstated. So … a $5 billion hole in the budget, I just don't think is realistic."

Finance Minister Colin Hansen said he agreed that the worst-case scenario is unlikely to occur.

The documents are preliminary briefing materials that were put together to allow the government to communicate a range of options ahead of the HST referendum, Hansen said.

"We want to make sure that this information gets out in a way that allows people to have an informed discussion about the merits or lack of merits of the harmonized sales tax," the minister said. "Based on that information, people can make a decision on how they want to vote."

Government posted documents online

The documents, which were released after a freedom of information request by the Globe and Mail newspaper, say the province would also have to repay $1 billion in transitional funding from the federal government and would forego another $600 million promised for next year.

The documents were later posted online by the government with the caveat that they are very preliminary briefing materials prepared by staff, and not a public position taken by the government.

The scenario laid out by the tax policy branch also says the province would lose $30 million in administrative cost savings it realized when it cut the PST, and might even have to fight claims to refund the HST that has already been paid.

B.C. residents will vote in a referendum on the HST next September, after more than 500,000 British Columbians signed an anti-HST petition earlier this year.

According to draft question for the referendum released on Wednesday, a vote to get rid of the HST will automatically be a vote to bring back the PST.

But the document also predicts that if the government moves to bring back the PST both consumer and industry groups will lobby to have it changed to increase the previous exceptions.

The B.C. government introduced the 12 per cent HST to replace the five per cent GST and seven per cent PST in July, but voter outrage over the tax eventually led the government to agree to hold a binding referendum on the tax and for Premier Gordon Campbell to announce his plans to resign.