Posted November 22, 2011
By Audrey Diamant, Partner, Tax Services, PricewaterhouseCoopers LLP
“Everything old is new again,” “Back to the future”, all catchphrases welcome as the Province of British Columbia agrees to roll back the BC HST, to be replaced by the soon-to-be-resuscitated BC provincial sales tax (PST).
The fate of the BC HST hung on the outcome of a referendum, with the population ultimately voting 54.73% to 45.27% to abolish the newly minted but unpopular BC HST. The tentative date for replacement is April 1, 2013, with the government developing an action plan and transitional rules to guide the process. The Province has stated that the PST will be levied at the old rate of 7%, “with all permanent PST exemptions” and some “common sense administrative improvements to streamline” the tax. Although this statement does not contemplate substantive changes to the BC PST as it existed at June 30, 2010, many are nevertheless looking at the transitional period as an opportunity not only to push for greater administrative efficiencies but also to lobby for expanded exemptions and to remove the most complex and business unfriendly elements of the tax. Business that were able to recover BC HST but not PST on their inputs, will be looking for some expanded relief under a new PST – they’ve had a taste of the good life and may need incentives in order to dissuade the most portable of them not to re-establish their business footprint in Alberta or parts east.
So what should businesses do in contemplation of the rollback? Understandably, little information has been released however, quarterly updates on progress have been promised by the government. While they develop the transitional rules and reconstruct the infrastructure necessary to support a PST, those interested in lobbying for change beyond the limited elements suggested in the government’s statement should begin the process, likely in concert with like-minded industry members and proactive associations. Businesses should also plot the timeline necessary to complete the tasks relevant to re-establishing the PST, and re-constituting, within that timeframe, the internal group or task force responsible for specific implementation steps – tax, IT, purchasing, sales and legal should all have a place at the table.
The reintroduction of the PST will impact longer-term budgeting, and needs to be contemplated in any legal agreements involving transactions straddling the implementation date. The transitional rules, when released, will impact fixed price contracts, returned goods, inventory and capital acquisitions. Major purchases may either be accelerated or deferred depending on whether a business is currently able to claim input tax credits, or would enjoy PST exemptions on certain of its inputs. PST self-assessment, exemption certification, and non-resident registration under the ‘super-registration rules’ may again form part of the sales tax lexicon in BC. It’s “déjà vu all over again.”