A Tale of Two Provinces: An Analysis of the Implementation of the Harmonized Sales Tax in British Columbia and Ontario

This paper analyzes the question of which conditions need to be present to increase the likelihood of passing economic or tax reform legislation. This is important because in many cases, the world now is very different from the one 30 years ago. Due to the internet, outsourcing of production from first world to third world countries, and a vast array of trade agreements with other countries, the world economy has changed. The economic and tax regulations that govern our provinces and our country need to change with it. There are largescale economic and tax changes that need to be made to make Canada competitive in the world market, and it will be difficult to pass legislation without approval from the Canadian public. This paper will provide suggestions on how to make it more likely that the legislation will pass. The literature review showed that for a taxation system to be effective, it should be simple, economically efficient, equitable, and predictable. Tax reforms should not be rushed in the name of political expediency, and they should be designed to far outlast the people that crafted and implemented them. The paper examines several federal and provincial reports commissioned on tax and economic policy topics by governments and their recommendations. A report is considered a success if the government adopted the report's recommendations. The main conclusion is that if a report is presented over a year before the next election, the report is much more likely to have its recommendations implemented, as the government does not have to worry about any backlash from the policy affecting their chance at re‐election. Particular attention is paid to the BC and Ontario HST implementations, which occurred on July 1, 2010 in both provinces, and resulted in the HST being adopted in Ontario and rolled back in British Columbia in 2013. The important differences between Ontario and BC's implementation 5 of the harmonized sales tax was that Ontario had been planning the move for a longer time than British Columbia and was able to craft a more comprehensive policy as a result. Ontario provided more short‐term tax cuts and payments to their at‐risk population than British Columbia did, gave their population more of a warning about their plan to implement the HST, and over time, Ontarians moved on to other topics. Another factor in the difference in results was the BC Recall and Initiative Act, which allows a citizen to propose an amendment to a piece of legislation or to propose new legislation if they have the signatures of 10% of registered voters in each electoral district. This gave anti‐HST groups a concrete goal to work towards, and they succeeded in passing that benchmark with ease. Once that benchmark was passed, the HST was doomed in BC. The HST became disastrous to support, and the BC Liberal government put the legislation up to a referendum to avoid the potential political fallout of using their majority to keep the HST in place. The paper concludes with some recommendations on how to make it more likely to pass large‐scale economic and tax legislation. These recommendations include not “springing” large‐scale policy changes on an unsuspecting population, creating a report to give non‐partisan recommendations for solving the problem, engaging with stakeholders and/or the public to gain outside perspective on the topic, and being transparent and up‐front with constituents about what the policy is, what it does, and how it can benefit them.

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