After more than three years of political agony over their genius idea to merge the provincial sales tax with the federal one, the B.C. Liberals pitched another one on Tuesday.
Let’s get rid of it completely.
It’s just a half-hearted notion in the throne speech, phrased as a possible concept. But it shows how keen Premier Christy Clark is to translate potential, hypothetical revenue in the far-off future into political benefit in the here and now.
B.C. is only 46 days away from the re-introduction of the provincial sales tax. Now they’re publicly broaching the idea of some day doing away with it completely. You can’t fault the Liberals for lack of long-term dreaming.
The sales-tax notion came in the context of the “transformational change” to be wrought by the fantastic amount of money expected to be made in the next generation by selling liquefied natural gas to Asia.
The speech said the government’s take will be used to reduce debt, but it could also be spent on social services, or making life more affordable.
“Whether it is eliminating the provincial sales tax, or making long-term investments in areas like education ... these are the kinds of opportunities the B.C. Prosperity Fund can provide.”
Dangling an airy notion like that in a formal presentation like the throne speech is a measure of how determined the Liberals are to find some kind of grand slam in the next two months before the election campaign starts.
The sales tax that so captivates the Liberals to the point where they can’t leave it alone brings in $6 billion a year. Eliminating it would bring B.C. up to par with the fabled sales-tax-free land of Alberta. Except that Alberta is deeply in the red, to the point where instituting a sales tax at long last is a point of public debate. And by the government’s own projections, eliminating the sales tax would be a decade or more away.
The basis for the entirely theoretical elimination of the sales tax would be the Prosperity Fund. All the corporate income-tax revenue from the LNG players, all the royalties from natural gas and all revenue from an LNG tax hike would go into the fund.
It would amount to $100 billion in revenue over 30 years. Instead of going into general revenue, the money would be used to make money, and withdrawals would be restricted, with the main aim of eliminating the $56 billion in long-term provincial debt.
It’s the vast stretch of time between now and the tax-free, debt-free world of LNG easy street that’s the problem.
Discounting all the other things that need doing now, the throne speech has gone all-in on one volatile part of the economy that doesn’t even exist yet.
There’s no question that LNG could be a generational jackpot for B.C. And that serious money is being spent to make it happen.
But keying a throne speech in 2013 to a revenue stream that won’t hit full flow for another seven years is an exercise in getting ahead of yourself.
Particularly when the whole venture hinges on so many variables. Nearly every natural-gas producer in the world is in the same race, doing the same things.
The new LNG tax is based on the idea Australia’s is higher, so there’s room to grow it. But Australia could lower its rate. And all the billion-dollar estimates are based on analyses that weren’t tabled Tuesday, and won’t be available until the budget next week. There are a dozen other variables at play, as well.
And as Opposition leader Adrian Dix noted, government projections on gas prices have been wrong before.
The last budget forecast royalty-revenue increases of 33 per cent a year, based on steady rises in gas prices.
It didn’t happen.
Clark is holding out a glorious future with a brimming treasury, which is fair enough. But casting LNG as an election issue, where the Liberals will make it happen and the New Democrats will “make entirely different decisions and lose that opportunity,” is just silly.
There’s nothing to suggest the NDP would turn their backs on the idea.
It’s an exciting new opportunity, but it doesn’t depend on Clark or the B.C. Liberals to happen.