The government of British Columbia will introduce a harmonized sales tax of 12%, replacing the PST and GST effective July 1, 2010, Premier Gordon Campbell said Thursday.

The move will give the province the lowest harmonized sales tax in Canada, by combining the 7% B.C. provincial sales tax with the 5% federal goods and services tax, said Campbell.

All other provinces with an HST, and the one proposed by Ontario, have a rate of 13%.

“This is the single biggest thing we can do to improve B.C.’s economy,” said Campbell.

The government estimates the HST will remove over $2 billion in costs for B.C. businesses, including an estimated $1.9 billion of sales tax removed from business inputs.

Similar to PST exemptions, the B.C. HST will provide consumers with point-of-sale rebates on a number of products including gasoline and diesel fuel for motor vehicles, books, children’s-sized clothing and footwear, children’s car seats and car booster seats, diapers and feminine hygiene products.

The proposed HST will include a partial rebate of the provincial portion of the single sales tax for new housing to ensure that new homes up to $400,000 will bear no more tax than under the current PST system, while homes above $400,000 will receive a flat rebate of about $20,000.

The government also announced that a refundable B.C. HST Credit will be paid quarterly with the GST and carbon tax credit to offset the impact of the tax on those with low incomes.

The B.C. government said the federal government will provide the province with $1.6 billion in transitional funding in recognition of the improvement this change will make to business competitiveness in Canada.

Ontario will also move to a harmonized sales tax on July 1, 2010.

IE