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UPDATED: Home builders, restaurateurs hope return to PST/GSt will help ailing sectors

New homes were previously PST-exempt, so purchases only included a five-per-cent HST. When the taxes were harmonized on July 1, 2010, the tax jumped to 12 per cent.
Eugene's owner Terry Vassiliadis hasn’t stopped smiling since Friday’s news that the HST will be extinguished.

Kyle Slavin

News staff

Now’s the time to buy a house. That’s the message from the Canadian Home Builders’ Association of Victoria following Friday’s referendum results overturning the HST in favour of the former GST-PST tax system.

“Any additional cost that consumers are paying through the HST, the reduction in housing prices over the past year (as a result of the HST implementation) certainly outweighs those considerations,” said Casey Edge, executive director of CHBA. “We saw a 39-per-cent drop in housing starts in Greater Victoria. … As a result there’s been a significant drop in price as well.”

Edge says the average price of a new, single-family home in Greater Victoria dropped $68,000 since July 2010 when the HST was implemented. But he doesn’t anticipate it to stay that way for long.

“Our fear is that consumers will continue to hold back waiting for the elimination of the HST. Unfortunately the housing market has been driven by provincial politics with this HST referendum for the past year,” he said. “It’s certainly a good time for consumers to be looking right now because people are caught up in the HST issue thinking that they’re going to save money if they wait for another year or two.”

That said, the CHBA supported extinguishing the tax because of the way it was brought in. There was no consultation with residents or businesses, and there were no tax incentives for consumers.

New homes were previously PST-exempt, so purchases only included a five-per-cent GST. When the taxes were harmonized on July 1, 2010, the tax jumped to 12 per cent.

Ever since, Fairfield Bicycle Shop co-owner Max Cochran says customers there have been complaining about being forced to pay seven-per-cent more taxes on everything in the store.

“We had a rush on big-ticket things right before it came in. … Since then we’ve certainly had a number of people groaning about it,” he said. “This 140-per-cent increase in the tax you’re paying, it didn’t sit well with a lot of people.”

He anticipates customers will be happy that the PST-GST system will return and bicycles are once again PST-exempt.

That’s welcome news to Saanich South MLA Lana Popham, who has been advocating that bicycles be tax exempt since the HST was announced.

“The problem that people were expressing to me is they didn’t like the way that British Columbia was losing control over their tax system. People were quite pleased with the exemptions in place – it was a reflection of our values,” she said. “The idea that we’re able to exempt green options was something people were proud of.”

However, Bill Downs, owner of Downs Construction in Esquimalt says going back to the old tax system is a bad idea. He says most businesses do benefit from the HST in place, as the government pays businesses the full 12-per-cent tax back on business-related expenses. Under the GST-PST, businesses see only the GST portion paid back.

“I’m disappointed because the HST is a good tax for British Columbia, or it was a good tax,” he said. When the HST came in, Downs Construction immediately spent $168,000 on equipment, saving seven-per-cent tax.

He said the savings allowed him to give raises to his company’s 38 employees.

The story is different for the owner of Eugene’s Greek Restaurant at University Heights. Terry Vassiliadis says he’s lost 30 per cent of his revenue, 50 per cent of his personal income, and he’s had to let go of four employees. “Yeah, I’d say (the HST) affected me in a very negative way,” Vassiliadis said. “You can’t tax the hospitality industry like you tax retail. … When they tax, you lose the volume and sales. People spend less when they come, and they come less frequently.”

Vassiliadis had a huge grin on his face all day Friday, celebrating a victory for the hospitality industry. One he hopes will help his business – and other restaurants – rebound sooner rather than later.

“There’s an end (to the HST) coming. We know it’s going back,” he said. “I hope people start coming back now, not 18 months or two years from now when it’s gone.”