British Columbia announces harmonization with GST
From the news desk of
Finance Minister Colin Hansen announced July 23, 2009 that British Columbia intends to harmonize with the GST. The province and the federal government have signed a Memorandum of Agreement which establishes the framework for the proposal, setting out key issues such as timing, the tax base, the rate and the flexibility available to the province. The province anticipates a $2 billion saving to BC businesses, $1.9 billion of which will come from the direct removal of tax on business inputs, while the balance will come from reduced compliance costs. The federal government will provide BC with $1.6 billion in transitional funding, and British Columbians will receive a refundable HST credit payable quarterly to offset the impact of the tax on low income earners.
After Ontario announced harmonization, speculation was rampant that other provinces were considering harmonization effective the same date. BC was first into the fray, announcing that, effective July 1, 2010, it will move to a single, 12% rate sales tax system, by harmonizing with the GST. The tax will be administered by the Canada Revenue Agency and the Canada Border Services Agency.
Point-of-sale rebates and credits for the provincial component will apply to sales of gasoline and diesel motor fuels, including bio-fuel components, books, children’s sized clothing and footwear, children’s car seats and car booster seats, diapers and feminine hygiene products. There will be a partial rebate of the provincial portion of the HST of up to $20,000 on all new housing priced up to $400,000 (to equate to the BC tax that would have been included in the price of the home under the social service tax regime), and for homes priced over this amount, a flat $20,000 rebate will be provided. Partial rebates will apply for municipalities, charities and eligible non-profit organizations to reduce the cost of the increased tax base to these organizations.
As in Ontario, businesses with more than $10 million in annual taxable revenues, and all financial institutions, will temporarily be denied recovery of the provincial component on certain purchases. While these purchases were not enumerated in the finance release, it is anticipated they will resemble those applicable in Ontario, which include energy costs, telecommunications (other than for Internet access and toll-free numbers), road vehicles weighing less than 3000 kg (including parts and certain services) and fuel used to power such vehicles, and food, beverages and entertainment.
Further details on the technical design of the tax, and on transitional rules, will be announced in the coming months. Brendan Moore is committed to assisting clients with the needed changes to systems to accommodate the change in tax status of product lines and services, including assistance with transitional issues. Clients and non-clients alike can look forward to a series of seminars in the coming months, and Brendan Moore stands ready to assist with per diem project work as clients require.
For the press release and backgrounder on this topic, please click here.
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