Frank McKenna believes Islanders need a little faith when it comes to a harmonized sales tax on P.E.I.
McKenna speaks from experience. The HST has been in place in New Brunswick, the province he once led as premier, for more than a decade.
A 14 per cent tax will take effect on the Island in April 2013, and has drawn criticism from some corners, including from the Opposition Progressive Conservatives.
McKenna said New Brunswickers levied similar arguments against HST when that province decided to implement it in 1996, but most residents now barely think about in anymore.
“Our major reason for doing it was to lower the overall tax rate to make it simpler and administratively more efficient and cheaper, and also to make (New Brunswick) a more attractive jurisdiction for investment, leading to jobs,” McKenna said of the province’s 13 per cent tax.
“(HST), however, is always controversial because the end result is always extraordinarily beneficial, but it takes a little bit of a leap of faith. You have to believe that businesses will end up passing the tax through, resulting in lower prices to consumers.”
McKenna led New Brunswick from 1987 to 1997, so his term as premier was just ending when HST came into effect there.
He recognized that the public dislikes the tax rate increasing on several services and commodities, but countered that the rate went down for most items that were subject to the tax already.
McKenna cited studies that found New Brunswick businesses did in fact pass their tax savings on to consumers. He added that similar studies found business investment went up 12 per cent per year following the HST implementation, while unemployment was cut in half thanks to the new system.
“Prince Edward Island is in a very, very good spot because we now have over 10 years of experience in New Brunswick, Nova Scotia and Newfoundland,” he said. “Consumers did not, in fact, lose — they were winners — and businesses ended up significantly increasing their investments.”
McKenna added that he has no vested interest in “shilling” HST to provinces like P.E.I., but said taxpayers here would see the positive results.
The most striking demonstration of that in Atlantic Canada, he said, is that no government or political party in the three provinces with HST has ever campaigned on a promise to reverse the tax.
“That is highly unusual,” he said. “That informs you that all parties have recognized the merit of the harmonized tax.”