B.C. HST gone, but consumers may feel the pain

British Columbians woke up to a seven-per-cent discount on items such as snacks, haircuts, bikes and restaurant meals on Monday after the province officially dropped the unpopular HST, reverting back to the old GST/PST tax system.

However, that money-saving euphoria may soon wear off as businesses with now fewer tax deductions are expected to pass their higher costs on to consumers.

“The reality is that the savings consumers think they're getting will be built it into the cost of the things they are purchasing - on multiple levels,” said Candace Nancke, partner at Vancouver area accounting firm Loren, Nancke & Company.

“Consumers can expect prices to eventually go up.”

As of April 1, companies will only be able to deduct five-per-cent GST on their business taxes, down from the 12-per-cent HST deduction they’ve taken since the combined tax was introduced in the summer of 2009.

It’s why business owners such as Michael Neill of Kelowna-based Mosaic Books aren’t welcoming the return to the old tax system in B.C.

“When the HST came in it gave businesses a break, but now that’s going to change,” said Neill.

And since only magazines and newspapers will be cheaper in his store as a result of the reversion to the GST/PST system, he’s not expecting a spike in sales to offset the difference.

Some businesses to see spike in sales

Consumers are expected to cash in on the savings, and have been holding off on purchasing bigger ticket items that are PST exempt.

April Jones, manager of Ride On Again Bikes in Vancouver’s Kitsilano neighbourhood, said she is expecting sales to pick up now that the retailer will only be charging five-per-cent GST on bikes.

“There were definitely a lot of people who made it clear over the past week or so that they were just browsing because they were going to come back in April when the taxes are lower,” she said.

Jones, along with a number of other businesses across B.C., is still figuring out how to make the switch to the new, old tax system.

The B.C. provincial government said last week that about 25,000 of the estimated 100,000 businesses obligated to collect the PST have not yet signed up.