If you do business in British Columbia, read this:
Recently a tax referendum was held in the province of BC, whereby British Columbians had to vote whether they were in favour of removing the harmonized sales tax (HST) that was introduced on July 1, 2010 and reinstate the goods and service tax (GST) and the provincial sales tax (PST). Although the result of the referendum is not expected to be announced until the end of August, business owners should considering the effect the outcome of the referendum may have on their business.
Retaining the HST
If the vote results in keeping the HST, the province of British Columbia has announced that it will reduce the HST rate to 11% from 12% effective July 1, 2012 with a further reduction to 10% on July 1, 2014.
Under this scenario, businesses not entitled to claim input tax credits should consider, where possible, deferring significant purchases until the reduction in the HST rate. This will reduce their overall costs.
Removal of HST and reinstating the PST regime
If the vote results in favour of removing the HST, business owners can expect to face an increase in operating costs. However taxpayers providing exempt services such as physicians, dentists and residential landlords may benefit from a return of the PST regime, due mainly to a smaller tax base of the PST and PST exemptions.
Registered business owners contemplating the purchase of significant capital assets should consider making the purchase before the reinstatement of the PST enabling them to claim the full HST as an input tax credit. Under the PST regime the PST would be an additional cost to the business owner.
Businesses engaged in exempt activities may need to evaluate their purchasing decisions and compare the cost under the HST regime and the net cost under the reinstated PST regime. Deferring a purchase could save them money.
If the PST regime is reinstated there would be most likely some sort of transitional rules. The nature of these rules and the timing for their effective dates are not known at this point.