VICTORIA – The B.C. government is promising to cut the harmonized sales tax rate by two percentage points over the next three years, and issue $175 rebate cheques for each child and lower-income senior this year.

The program is aimed at persuading voters to keep the HST in a mail-in referendum that begins in June. If the HST survives, the first one per cent rate cut would take effect July 1, 2012 and businesses would start paying more tax.

Finance Minister Kevin Falcon said the changes mean the average B.C. family will see an overall tax reduction of $120 a year when the HST rate reaches 10 per cent.

The HST currently costs the statistically average household an additional $350 a year, although there are wide variations for actual families. Falcon acknowledged that some families would continue to pay more until 2014.

If a majority of voters opt to keep the HST, current low-income rebates would continue to be paid, and $175 transition cheques would go to parents for each child under 18, and to some seniors as well.

Single seniors earning up to $40,000 a year would get the entire $175, and a partial payment would got those with incomes up to $43,500. Senior couples would receive $175 for combined income up to $40,000 and a partial payment up to a $50,000 combined income.

Falcon said with the rebate cheques taken into account, the majority of families are better off with an 11 per cent HST rate. Once the rate falls to 10 per cent, all income brackets are better off than they were under the old provincial sales tax at seven per cent, he said.

To keep the government’s deficit reduction plan on track, Falcon is proposing to raise the general corporate income tax rate two points to 12 per cent, and delay a small business tax cut scheduled for next year. The small business income tax is currently at 2.5 per cent, scheduled to drop to zero in 2012.

The proposed corporate tax increase mirrors one of the promises made by NDP leader Adrian Dix in his leadership campaign. Dix said Wednesday the public will still reject the HST because the B.C. Liberals can’t be trusted to tell the truth.

Premier Christy Clark said the increase to corporate taxes and retaining small business income tax would be temporary moves, and the government will return to its business tax reduction program when the budget is balanced.

With the HST rate reduction, tobacco taxes would be raised to offset the reductions to HST. Liquor taxes would also be unaffected.