Problem
Taxes are onerous and prohibitive to economic growth. The Provincial Sales Tax (PST) is no different. Here in BC, it adds 7% not just to all retail, but also layers of business inputs. It is obvious that end-users bear the higher cost of living, but what about the lost economic opportunities? When growth is stifled, we lose innovation, prosperity, and countless jobs that either disappear or never even had a chance to materialize.
Solution
British Columbia should convert the PST into a value-added tax (VAT) like the federal Goods and Services Tax (GST) so that businesses have incentive to do things such as upgrade equipment or expand their scope of business.
In Depth
Businesses collect PST from their customers on behalf of the provincial government. They then remit the collected funds, minus an insignificant commission, to the government. In the case of a value-added tax (VAT), the business collects the tax, but also tracks the funds paid to suppliers through the course of business activities. These funds are called input-tax-credits. When the business prepares the remittance form, input-tax-credits are subtracted from the tax collected, and only the difference is remitted.
This ensures that the business is relieved of the PST expense and thus more able to invest in itself.