Thursday, June 30, 2011

The benefits of value-added taxes like the HST, and the folly of referendums on taxes

I really hope the referendum on the HST in British Columbia ends up with a decision to keep the tax.

The Globe and Mail reports on a study by the C.D. Howe Institute that shows the HST has resulted in a better environment for business (and hence employment) while not affecting consumers negatively.

It is clear to anyone who understands the economic principles involved, that value-added taxes are far more efficient than 'flat' sales taxes that tax the entire sales price multiple times. A VAT taxes just the increase in value, and allows exporters to export without having foreign consumers indirectly pay taxes to support Canadian government services. Such taxes therefore help support jobs in Canada.

Also harmonizing the GST and PST will cut red tape and simplify things for business and consumers alike. Surely a win-win.

Putting a complex economic issue to a referendum, as was done in British Columbia, is just plain silly. The 'opposers' who forced it are populists who have an axe to grind and don't understand economics. The problem really lies with the original legislation that allowed such matters to be taken to a referendum via a petition.

I am glad I don't live in BC: The Vancouver riots and the high cost of real-estate give a negative impression, but this kind of "nonsense-onomics" will just add to my feeling that I would never want to live there. Too bad; it's a beautiful province.

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