Faced with a ballooning deficit, B.C. Premier Christy Clark is negotiating with Ottawa for a break on repaying $1.6-billion in federal funding for a harmonized sales tax her province is now preparing to repeal.
Pleading economic hardship, she's asking the Harper government to let B.C. keep a portion of the cash and grant the province considerable time to repay the remainder.
B.C. is the only province so far to back out of the HST, a levy championed by the Harper government because it represents a tax break for business.
Ms. Clark, who was in Ottawa Tuesday for meetings with federal cabinet ministers, would not say what sort of discount B.C. was seeking.
But central to her argument is the notion that by the time it's repealed, the HST will have been in place in B.C. for two-thirds of the period that was required in the federal-provincial deal which doled out the $1.6-billion.
The Harper government gave B.C. the cash as an incentive to switch to the HST, but after provincial voters decided in an August, 2011 referendum decision to scrap the blended tax, Ms. Clark's government is now obliged to give back every cent.
The HST combines a province's sales tax and the federal goods and services levy into a single charge – but one an independent commission in B.C. concluded costs the families on average $350 more each year.
Ms. Clark emphasized in an interview that B.C. is not denying it is obliged to pay back all the cash.
"But having said that, gosh, you know, we had the HST in place for two-thirds of the agreed period and it's pretty tough economic times, so we're hoping that we can negotiate some agreement that will recognize those two facts," she said.
B.C. this week announced its projected deficit this fiscal year would top $3-billion, and the province's Finance Minister, Kevin Falcon, has now backed away from a firm government pledge to balance the budget in time for the 2013 provincial election. Mr. Falcon is also in charge of the HST file.
"We're negotiating with the federal government to try and get the best deal we can for British Columbia on the HST," Ms. Clark said. "We'd like to make sure that we minimize the impact on British Columbians. I am hopeful. I understand they're in tough times too, but I believe they want to do the right thing for British Columbia," she said of Ottawa. The federal government itself is projecting a $31-billion deficit for the 2011-12 fiscal year.
Ms. Clark, who is facing a fixed election date in about 18 months, is under pressure to show voters she's delivering for B.C. She faces a revitalized NDP, which polls have suggested is ahead of the Liberals among decided voters.
The Premier said Victoria is requesting an extended payback period, but declined to say whether this would be a matter of several years or a longer period such as five years or a decade.
"We're asking them to be flexible and we're hoping that they will recognize that while we need to pay it back there might be some ways to be flexible about over what period we would pay it back and the total amount that we would pay back," she said.
She said British Columbians realized they'd be on the hook for the full $1.6-billion when they voted to scrap the HST in a referendum. But, she said, they expect her to get a better deal.
"They also knew that we were going to go to bat for them and try and negotiate that down," she said.
Steven Chase