Tax Alerts
British Columbia Government to Reduce HST Rate while Increasing Corporate Tax Revenue
With a public vote to decide the fate of the BC Harmonized Sales Tax (HST) fast approaching, Finance Minister Kevin Falcon announced changes on May 25, 2011 that will benefit families and lessen any negative impact of the HST. With these changes, temporary measures were also announced that would see corporate income tax revenues increase to ensure that the government can meet its balanced budget commitment.
If the referendum decision is to keep the HST, the government has committed to reducing the total HST rate from 12% to 10% by July 1, 2014. The reduction will be phased-in by cutting the provincial portion of the rate to 6% effective July 1, 2012, then further to 5% by July 1, 2014. The following chart summarizes the planned cuts:
Planned BC HST Rate Reductions |
| |
Current |
July 1, 2012 |
July 1, 2014 |
| HST Rate - Provincial Portion |
7% |
6% |
5% |
HST Rate – Total
(Federal and Provincial) |
12% |
11% |
10% |
To further benefit families, it was also announced that the government will provide a one-time transition cheque of $175 for every child under 18 to help offset the costs of the HST before the 2012 rate reduction. As well, low- and modest-income seniors will receive a one-time transition cheque of $175. These cheques would be issued by the end of the year, if the HST is retained.
The planned HST measures will come at a cost for BC businesses. Corporate tax revenue will be increased in order to keep the province on track to balance its budget in 2013/14 as set out in the 2011 BC budget. The general corporate tax rate will increase from 10% to 12% effective January 1, 2012. In addition, the small business tax rate reduction (to 0%) planned for April 1, 2012 will be postponed – the rate will remain at 2.5%. If the HST is retained, the government has indicated that these measures will be temporary until the province’s fiscal situation allows for further reductions.
Ballots for the HST referendum are to be mailed out to British Columbians in June and are due back by July 22, 2011.
If the HST is retained, businesses will need to adjust their accounting systems for the HST rate changes that will come in 2012 and 2014. We will provide more information on this when the time comes. If you have any questions on how these planned HST and corporate tax changes will affect you, contact your BDO advisor.
