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| New HST Deal On The Cards For BC |
by Mike Godfrey, Tax-News.com, Washington
Wednesday, December 21, 2011
British Columbia may get a better deal on repaying its harmonized sales tax (HST)
loans as ministers discuss extending the time limit by which the province has to return
the funds.
When it implemented an HST regime in 2010, the British Columbian government
accepted CAD1.6bn (USD1.56bn) in transition funding from the federal 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. The transition back to PST/GST is expected
to take around 18 months and cost the province CAD2.2bn by 2013-14. These losses
include CAD1.6bn in 2011-12, associated with reimbursing the federal government,
and more than CAD700m loss from lower tax revenue and increased expenses over
the period to 2013-14.
The province had been due to repay the money by March, 2012, but comments by
federal Finance Minister Jim Flaherty suggest that British Columbia may be offered
a partial reprieve in this respect. While stressing that there is no question
that the loan will not be repaid in full,
Flaherty told reporters that ministers may come to an agreement on a revised
repayment schedule.
Speaking in Victoria on December 19, Flaherty confirmed that the province was
seeking extra time. He said that he had held talks with his British Columbian
counterpart, Kevin Falcon, and was hopeful that a deal could be reached "very
soon".
Falcon added that the provincial government had always been clear that it would uphold
its obligation and repay the money owed. What is being discussed with Flaherty
are the terms of the agreement under which this refund must be carried out.
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