BC HST Repeal: How We Got Here & Where We Are Headed

bc hst repealWhether you like it or not, the BC HST repeal is set to take place on March 31, 2013 and you need to be prepared to make the changes once the clock strikes midnight (especially those with cash registers).

Before we dive into the details of the BC HST repeal, you need to understand the context via a short history of the commodity tax picture in British Columbia. I brought in Mike Boven, a commodity tax expert with BDO Canada, to discuss how we got from A to B in this special BC HST repeal article series.

How The Story Goes

To make a long story short, in May of 2009 we elected our current provincial government who swore during the election that harmonization of sales taxes were “not on the radar,”(which was their exact words).

In July of 2009 they announced that in the intervening six weeks, they had all of a sudden had a revelation and decided that harmonizing our provincial sales taxes with the federal GST was a great idea, even though they weren’t thinking anything of the sort six weeks earlier.

bc hst repeal

Finance Minister Colin Hansen pouring 1,478 loonies into a jar to demonstrate the savings that a family of four with an annual income of $30,000 realized as a result of the HST.

The decision was that we would be harmonizing our provincial sales tax with the federal GST effective July 1st 2010 and then the combined tax would be known as the harmonized sales tax (HST).

Needless to say, there was a fair bit of grass roots opposition to it. The harmonized sales tax has sort of a broader taxation base then our old provincial sales tax did so some things that were not subject to provincial sales tax before were going to become taxable.

The Campaign That Began The BC HST Repeal

There is sort of a feeling of reservation amongst the electorate, shall we say, as to whether this tax was going to be harmful to them as consumers. Despite this, the business community embraces it because, structurally speaking, the harmonized sales tax tends to work better overall for businesses than the old provincial sales tax (PST).

bc hst repeal

Discussions at the provincial level to determine the future of the Harmonized Sales Tax in British Columbia

At this point there was a campaign that began, largely headed by a former premier named Bill Vander Zalm, to repeal the HST. We do have repeal legislation in the Province of British Columbia but the legislation is actually designed not to work. It’s virtually impossible to successfully repeal a piece of legislation by referendum because you need an insurmountable number of votes in every single riding.

Voters Say ‘YES’ To BC HST Repeal

The legislation made for great political theater but it wasn’t designed to actually work but in the course of this campaign, our premier at the time, Gordon Campbell sort of unilaterally changed the rules at a press conference. He announced that, rather than having to meet the statutory requirement in the referendum to have this legislation repealed, if a simple majority voted against the HST that his government would repeal it.

On August 26, 2011 the results of that referendum came out and voters decided to go through with the BC HST repeal. On February 17, 2012 our finance minister announced that the HST would be repealed effective April 1st 2013.

What’s Happening Now

Effective April 1st 2013, the harmonized sales tax, which is the combined federal GST and a provincial component, will be repealed and will go back to a two-tax system. This is comprised of the federal GST at 5% and the provincial sales tax at 7%.

bc hst repeal

Finance Minister Kevin Falcon announcing plans to reinstate the combined 12 per cent PST and GST tax system following the referendum decision by British Columbians to extinguish the HST.

The legislation for that has really just been released or finalized in the last few months, although now it’s subject to a whole bunch of pending amendments and at the current point do not have any regulations to go with the legislation.

The old sales tax we had in BC was called the social services tax and the new tax is called the provincial sales tax. A quirk of both pieces of legislation was that a big chunk of the effective rules are contained in the regulations.

We don’t have any of the regulations yet so there’s still an enormous component of our new set of rules that we don’t have just a couple short months before the legislation comes into play.

More In The Series To Come

Mike Boven is going to be helping me breakdown the BC HST repeal over the coming weeks in a 6-part series. Our goal is to have business owners across BC educated and prepared for the transition date so stay tuned for the next article later this week.

BC HST Repeal Article Series 

  1. BC HST Repeal: How We Got Here & Where We Are Headed
  2. What Every Retailer Needs To Know About The BC HST Repeal
  3. BC HST Repeal: Details On Registering For PST
  4. BC Businesses Should Buy Equipment Before April 1st
  5. Available March 4, 2013
  6. Available March 7, 2013

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