August 16, 2010 / 8:51 PM / 7 years ago

Fight over Canadian sales tax change hits courts

VANCOUVER (Reuters) - Opponents of an overhaul of sales taxes in British Columbia asked a court on Monday to strike down the province’s tax deal with the federal government as unconstitutional “taxation without representation”.

British Columbia agreed last year to merge its sales tax into the federal government’s sales tax, but the deal to create a Harmonized Sales Tax (HST) ignited a political firestorm in the Pacific Coast province that has badly burned provincial Premier Gordon Campbell’s standings in the polls.

The battle has pitted HST opponents, including many small businesses and consumers, against Campbell’s right-of-center BC Liberal Party and industry groups that say the tax changes will boost the economy.

HST opponents told the court on Monday the government violated Canada’s Constitution by failing to get provincial legislature’s approval to seek a deal with the federal Conservative government.

Ontario signed a similar tax deal with Ottawa last year, but it has not created the same uproar in that province. The HST became effective in British Columbia in July. Several other Canadian provinces signed HST deals with Ottawa years ago.

In British Columbia, the HST combined a 7 percent provincial sales tax with the 5 percent federal goods and services tax to create a 12 percent harmonized tax.

“People have fought wars over taxation without representation,” lawyer Joe Arvay told British Columbia Supreme Court in Vancouver.

HST opponents want the court to order the agreement sent back to provincial legislature for consideration. They say lawmakers in the legislature would be unlikely to approve it given voter opposition.

Government lawyers are expected to present their arguments defending the tax later this week.

The government has been joined by a coalition of industry groups that support the HST, saying the tax changes help them remain competitive by lowering production costs. They say the lower costs can be passed on to consumers.

HST opponents say the tax hurts consumers because it is applied to some goods and services, such as restaurant meals, that were subject only to the federal tax before the HST took effect in July.

Reporting Allan Dowd, Editing by Peter Galloway

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