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| Canada, BC Agree Terms Of HST Repayment |
by Mike Godfrey, Tax-News.com, Washington
Friday, January 13, 2012
British Columbia has finally agreed a repayment schedule for the federally-backed funding the province received for its failed transition to a harmonised
sales tax (HST) regime.
When it implemented an HST regime in 2010, the British Columbian government
accepted CAD1.6bn (USD1.57bn) in transition funding from the federal Canadian government.
Under the terms of its agreement, this money was to be returned if the new system
was scrapped before July, 2015.
Under the old sales tax regime, provincial sales tax (PST) was charged at 7%,
with the federal general sales tax (GST) levied at 5%. The HST blended the two
taxes, resulting in an overall rate of 12%. British Columbian electors rejected
the HST regime in August, with 54.73% voting to return to the previous system.
British Columbia's Finance Minister Kevin Falcon has now announced that the
province has concluded an agreement with the federal government for the orderly
repayment of the transition funding. Under the new agreement, the Province will
have five years to repay in full the money, and Canada has agreed to waive any
interest charges over this period.
The Finance Ministry maintains that while the Province has always acknowledged
its responsibility for the repayment of the federal transition funding, the
actual timing of when that repayment was to occur remained something for British
Columbia and Canada to further discuss.
Falcon says that the extended repayment schedule will save the Province debt
interest costs that would otherwise have been incurred had the Province had
to pay back the full amount right away.
The full cost of the CAD1.6bn repayment will still be booked in the provincial
government’s 2011-12 fiscal year.
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