Presented here are the facts and figures surrounding the new B.C. HST (value added tax) including some of the benefits associated with the harmonization of the PST (cascading tax) and federal GST. In addition, we incorporate some of the main items discussed during the BC Government announcement of the B.C. Harmonized Sales Tax and the benefits to businesses and certain industry sectors.

Some Quick Facts About the Benefits of the British Columbia HST – Harmonized Sales Tax Benefits in a Nutshell

	The B.C. HST is a ‘value-added sales tax’ combining the 7% provincial sales tax (PST) with the 5% federal Goods and Services Tax (GST). The result is the value added B.C. Harmonized Sales Tax of 12%.
	Value-added taxes such as the B.C. HST reduces the tax burden on all businesses. Currently, it is estimated that businesses pay almost 50% of the PST (called a cascading tax) which is embedded within the price of consumer goods and services as a hidden tax. As B.C. PST is a cascading tax, the tax is applied to all sales of goods regardless of the purchaser.
	The implementation of the B.C. Harmonized Sales Tax as a value-added tax will eliminate taxes on productivity while replacing them with taxes on consumption. This will reduce business taxes by about 40% or $1.9 billions per year. This will be comparable to 29 of 30 OECD countries as well as 5 other Canadian provinces.
	The value added HST harmonized sales tax in British Columbia will make it more competitive and attractive for new investments. This will result in higher growth rates and more jobs.
	The B.C. Harmonized Sales Tax will be a combined rate of 12% HST, the lowest of any province with this harmonization. These are the other provincial HST rates: Ontario (13%), New Brunswick (13%), Newfoundland and Labrador (13%), and Nova Scotia (13%). Quebec has a harmonized sales tax that is similar to the HST and is 12.875% increasing to 13.925% on January 1, 2011. Ontario’s HST does not take into effect until July 1st, 2010 (like the B.C. Harmonized Sales Tax).
	The B.C. PST will be eliminated on July 1, 2010 when the B.C. HST comes into effect, eliminating a lot of uncessarry and time consuming paperwork for businesses in the province.
	The point-of-sale rebates for the B.C. portion of the HST will include such basic necessities as groceries, prescription drugs, and medical devices. In addition the HST point of sale rebates will be extended to gasoline, fuel and all types of diesel and biofuels in addition to most children’s products, books, and feminine hygiene products. See below for an extended list of point of sale rebates on the B.C. Harmonized Sales Tax.
	B.C. is proposing to provide a B.C. HST Credit to low income individuals. This B.C. HST Credit will be on a refundable basis and will be in combination with the quarterly GST Credit payments that low income individuals currently receive. The maximum amount of the B.C. HST Credit would be $230 for individuals with incomes up to $20,000 and $230 per family member for families with iincomes up to $25,000 in British Columbia. There is also a maximum B.C. Harmonized Sales Tax Credit that will be phased out by 4% of income above these thresholds.
	The ability to phase in the use of input tax credits (ITCs) on purchase of specific items by B.C. businesses with taxable sales in excess of $10M and financial institutions is part of the new flexibility of the BC Harmonized Sales Tax. It is proposed that they would have their input tax credits or ITCs on certain items temporarily restricted including energy, telecommunications services, road vehicles, food, beverages and entertainment.
	The Federal Government will be administering the B.C. HST. The Federal Government has also given the province of B.C. $1.6 Billion to implement the Harmonized Sales Tax.

The BC Government Presentation Announcing the Harmonized Sales Tax
According to the provincial government, the Harmonized Sales Tax or HST will bring about a competitive advantage for British Columbia. There were several sectors and industries that had asked for the harmonization of the provincial PST and the federal GST taxes into the Harmonized BC Sales Tax, which according the the government is a better tax for B.C. in general. The industries and organization that expressed their interest in the harmonization of the BC taxes included the BC Business Council, BC Progress Board, BC Chamber of Commercie, Canada West Foundation, the Conference Board of Canada, Retail Council of Canada, Chartered Accountants of British Columbia, Canadian Manufacturers and Exporters in addition to the Certified General Accounts, all of whom support the BC Governments announcement of the Harmonized Sales Tax or HST which will take effect come July 1st, 2010. According the the provincial government, the opportunity for this harmonization is right now. The federal government in Ottawa is providing new flexilbity in how the BC Harmonized Sales Tax may work including how B.C can set its own HST tax rate at 12% and how the province can tailor the Harmonized Sales Tax to its own specific needs with point of sales rebates. BC also receives $1.6 billion from the federal government for implementing the Harmonized HST tax. As Ontario implements the HST on July 1, 2010, the BC HST will also follow suit on the same day, making it the second province this year to harmonize their taxes. By incorporating this combined tax structure, it gives BC a level playing field with other provinces and economies and the 12% HST is still the lowest combined taxes in all of Canada. Ontario’s HST rate is at 13% and the proposed Harmonized Sales Taxes for Newfoundland/Labrador, Nova Scotia and New Brunswick also run at 13%.

Why the BC HST? And Why Now?
The BC province will get over $2 billion in savings by incorporating the combined HST harmonized taxes in comparison to keeping the separate GST and PST taxes. Construction saves an estimated $880 million while manufacturing saves $140 million. Transportation will save $210 million while the forestry sector will save approximately $140 million. Mining, oil and gas industries will save $80 million because of the B.C. Harmonized Sales Tax while business compliance costs are reduced by over $150 million. When it comes to competing against the world, British Columbia will have the competitive marginal effective tax rate that will keep it competitive with other nations and provinces. With the implementation of the B.C. HST for July 1st, 2010, the BC governmet is ironing out the rules and point of sales rebates and credits associated with this new tax. Currently the point of sales rebates/credits will go towards such things as gasoline and diesel fuel, books, childrens’ clothes and car seats, baby diapers, feminine hygiene products, new homes up to $400,000 and low income tax credit. With significant tax relief since 2001 in British Columbia, the province will build on its strengths for maintaining its status in the world economy with the 12% HST BC Harmonized Sales Tax. BC currently has the lowest provincial personal income taxes in all of Canada (for individuals earning up to $116,000) and there was the elimination of provincial income taxes for 250,000 low income earners already. There has been a 44% reduction in small business corporate income tax rates and 39% reduction in general corporate income tax rates by 2011.

The long term benefits of the BC HST or Harmonized Sales Tax is for the upcoming generations as the province will become more competitive from the business climate standpoint and there will be areduction in administrative and compliance costs. The province of BC will also be able to attract new investments, increase productivity and create jobs and long term economic growth through the harmonization of the GST and PST into the HST.

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