Used car tax will not drop to pre-HST levels

The 12 per cent tax on the private sale of used cars will not be rolled back to seven per cent when the Harmonized Sales Tax is phased out on April 1, CBC News has learned.

That's upset Mike Comeau, who has been waiting to buy a used car from a private seller because he thought the tax would drop in April.

Now, he's angry to learn that on a $16,000 vehicle, the extra five per cent tax will cost him $800 — money he'd prefer to use for other vehicle costs.

"It's a lot of fuel. It's tires. It's insurance. It is a lot of money," he told CBC News.

Comeau feels especially betrayed because he was part of the anti-HST protest, and like many, he thought all sales taxes would revert to pre-HST levels once the referendum passed.

"I think people would be outraged that this Liberal government snuck this in without any publicity whatsoever. No one knows about it."

Leveling the playing field

B.C.'s Finance Minister Mike de Jong says the reason the government is not rolling the tax on used vehicles sold privately back to pre-HST levels is to keep the tax in line with the 12 per cent tax on all new and used vehicles sold by dealers.

Before the HST was brought in July 2010, there was only a seven per cent PST on the sale of used vehicles by private sellers when the price of the vehicle was less than $55,000. All cars sold by dealers were taxed with an additional five per cent GST, for a total of 12 per cent sales tax.

"We made the decision to eliminate that differential and it really wasn't tied to whether we were in a HST or PST regime," said de Jong.

At face value, keeping the tax seems to contradict the promise made last year by former finance minister Kevin Falcon to roll back all taxes to what they were in 2010, when the HST is phased out. But Falcon never specifically promised to keep the taxes at the same old rates.

"As promised, on April 1, 2013 consumers will only pay PST on those goods and services that were subject to PST before the implementation of the HST. All permanent PST exemptions will be re-implemented," said Falcon in May 2012.

The opposition NDP — who also support keeping the tax on all used cars at 12 per cent — estimates that keeping the tax will generate an $45 million in additional revenue for the province this year.

De Jong says that's revenue the government can't afford to give up.

"It's a tax, and balancing the budget is not easy," he told CBC News.

Insurance brokers expecting outrage

B.C.'s Autoplan dealers collect sales tax for the government on private used car sales when new buyers change the vehicle registration.

Many like broker John Wong are now expecting some unhappy customers. He says the tax is unfair.

"It is a big cash grab. You know, it's not right."

"We will be getting the rant from them, but not the government, because we're the frontline," says Wong.

"They'll give us heck, but we'll have to take it because that's our job."   

If sellers and buyers try to cheat the tax system by mis-representing the value of a vehicle purchase, even by 10 per cent, Autoplan dealers can double-check the book value of the car.

And if the tax department catches anyone lying about the agreed sale price, they face a $10,000 fine or even jail time.