B.C. Government Cracks Down on PST-Dodgers

In a move that's been called everything from petty to mean-spirited, the government of British Columbia has embarked on a mission to nab B.C. cross-border shoppers who avoid paying the 7 percent provincial sales tax by shopping in PST-free Alberta. In an effort to recover about $16 million in lost revenue, the government has ordered retail giant Costco to hand over information on its B.C. members who have shopped in its Alberta stores over the last several years.

But Costco is refusing on the grounds divulging information on the shopping habits of its members is an invasion of privacy. The retailer has instead filed an petition with the B.C. Supreme Court seeking an injunction declaring the government's position illegal.

Costco has been singled out by the B.C. government because it keeps a membership database of its customers—a paper trail the government would now like to get its hands on.

Although B.C. Small Business and Revenue Minister Rick Thorpe said last Thursday that the privacy of any information turned in would be protected, David Gorry, a Calgary-based lawyer who specializes in privacy laws, says that consumer privacy is not being protected if their personal information is going to be used to prosecute them.

"The request of the B.C. government to disclose the names, addresses and spending patterns of B.C. residents who shop at Alberta Costcos violates both the spirit and intent of the privacy law," says Gorry.

"The B.C. government enacted legislation in 2004 to protect the privacy of personal information in the private sector, so what the government is doing here is applying a double standard--they want one set of rules to protect privacy in the private sector but they don't want to be bound by those same rules themselves."

Gorry says that B.C. citizens who gave their information to Costco should be "incensed" that the government is going to such great lengths to violate their privacy. He says information gathered for one purpose should be restricted to that purpose alone and believes an unhealthy precedent could be set if the government is successful in its endeavour.

"To start spying on your citizens....to what extent are they willing to go? This could be just the tip of the iceberg."

As a result of widespread criticism over the issue, Thorpe called for a review of B.C.'s provincial sales tax system last Thursday, saying the review would examine "our whole approach to cross-border tax administration." Thorpe's office claims that B.C. retailers who live near the Alberta border "have been hurting and have asked for this" and that the whole initiative to recover the lost revenue is standard operating procedure.

But Dawson Creek city councillor Alvin Stedel, a member of a PST Steering Committee which has been working to find a solution to the cross-border shopping problem, says what they have been asking for over the last few years is a graduated lower sales tax in the communities close to the border, but so far the government has refused to consider it.

"The option we put forward is to reduce the PST in border communities to 4 percent so that people would be less likely to travel long distances just to purchase goods in another jurisdiction," says Stedel.

"We found that if the PST is more than 5 percent some people make a conscious decision to try and avoid it. We feel we've got a solution that would take a lot of the heat off--all we ask for is a pilot project to see if this would actually work."

Stedel says the committee's studies, which included a survey of shopping patterns throughout B.C., showed that people who live east of the Selkirk Mountain Range tend to shop more often in Alberta, while those who live west of the mountains very seldom shop in Alberta because it's too far to go. So a lower sales tax would only need to apply east of the Selkirk Mountains. Stedel says that people from Dawson Creek who want to shop at Costco would be shopping in Alberta regardless of the PST issue, because the closest Costco is a one-hour drive away in Grande Prairie, Alberta, while the closest Costco in B.C is five hours away in Prince George.

Estimates from six years ago showed that more than $230 million is lost annually in communities near the border as a result of people choosing to buy in Alberta, which would work out to about $16 million in lost PST revenue for the government. But analysts believe the government could expect to recover no more than 10 percent of that if it ends up going ahead with initiatives to recover money from B.C. residents shopping out of province.

"The fact that they've gone after a specific retailer asking them to divulge private information is completely inappropriate," says NDP revenue critic Maurine Karagianis. "I don't fault Costco at all for refusing to do that. It seems frivolous to be going after ordinary people here in B.C. who are trying to stretch a dollar."

Karagianis says the government should be considering "made in B.C. solutions" such as introducing the graduated sales tax in border communities rather than trying to chase down those who shop at Costco. She says B.C. may end up spending more taxpayers dollars fighting Costco's legal challenge than the amount of PST they might eventually expect to recover from cross-border shoppers.

"I think it's disproportionate to the amount of effort that's gone into it. It shows that the minister has not thought through this process very well...the government should be looking at better use of their resources and better solutions."