Tax Alerts - The demise of BC HST: BC Government sets a transition plan
For better or worse, the BC HST has been defeated in the referendum. The government of
BC has committed itself to reinstating the old PST/GST regime, in accordance with the
voters’ wishes.
After the announcement of the referendum results calling for the elimination of the HST, Minister of Finance Kevin Falcon announced a preliminary action plan for BC’s return to a combined GST/PST system. We have summarized some of the key issues to be addressed below.
General Issues
- The PST will be reinstated at seven per cent with all permanent PST exemptions that existed at the time of harmonization. The province may make some “common sense” administrative improvements to streamline the PST. Transitional rules will also be issued – no details were announced.
- The transition process will take a minimum of 18 months, as the province did not retain the infrastructure needed to administer the tax.
- The HST will continue to operate as usual, including the payment of the HST credit to lower-income taxpayers, until the PST system become applicable.
Governmental Issues
- The BC government will need to draft legislation to reintroduce the PST, which may include some streamlining and improvements.
- Negotiations with the Federal government will be required in respect of the Comprehensive Integrated Tax Coordination Agreement that BC entered into, including setting terms for the repayment of the $1.6 billion of Federal funding received for adopting the HST.
Tax Administration
- BC will develop and establish appropriate tax forms, data gathering systems, billing, remittance/collection, audit, assessment and appeal processes to properly administer the PST and other related taxes in B.C. This will include re-establishing tax administration offices and staff.
- BC will need to register approximately 100,000 businesses as PST collectors. This will be a combination of re-registering businesses that previously collected PST as well as registering approximately 30,000 businesses that were not part of the previous PST system.
- Businesses will need to change their own electronic and manual systems and processes to assess, collect, report and remit the PST. This process will presumably be easier for those businesses that were previously subject to the PST system.
- Businesses will also need to review all agreements that they have entered into during recent years. Many contracts may have anticipated the implementation of the HST but not the reversal of that event.
In addition to a series of Tax Alerts released with this update, we will be providing more information to our clients as this process unfolds. In the meantime, please contact your BDO advisor if you have any questions.
