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Tax changes recommended to make BC more competitive

Last Updated Nov 23, 2016 at 2:28 pm PST

Summary

A special panel recommends exempting some businesses from paying the PST

A new report says the provincial sales tax puts a significant burden on businesses

VANCOUVER (NEWS 1130) – Whether you hated the HST or embraced it, we might one day see a compromise.

The group tasked with finding ways to make BC more competitive for business is recommending we replace the PST with what it calls a ‘made-in-BC value-added tax.’ That’s one of four recommendations being made to the BC government by the Commission on Tax Competitiveness.

The panel was formed in July to review the BC corporate tax structure by holding consultations. Twenty-seven submissions were received, about 60 responses came through online and 12 stakeholder meetings were held.

The commission found the PST to be the major barrier to tax competitiveness. Three of the four recommendations deal with the sales tax.

The first suggestion is to make capital expenditures exempt from the PST. The commission finds that would give more companies incentive to upgrade their equipment.

The second recommendation is to exempt some “inputs” for business, basically take the PST off some business expenses such as electricity and telecommunications costs. Commission Chair Bev Dahlby says many submissions they received suggested this. “In particular we heard on many occasions that removing the tax on electricity would be of substantial benefit to many sectors, but especially the resource sector. Removing the PST on these business inputs, electricity, other energy, telecommunications services and software would be advantageous and generally improve the competitiveness of the business sector.”

The third idea is to replace the PST with a “made in BC, value added tax.” The simplest way to describe this value added tax is it would similar to the GST. Each business would write off this new tax and only the consumer pays, as is done with the GST now. Dahlby says this is a long-term suggestion. “We recognize it would require a substantial amount of consultation, British Columbia would have the capacity and flexibility to design the tax to fit the preferences and priorities of the British Columbia population, but this is really the main instrument that the province could use to eliminate this major problem.”

Lastly, the commission recommends letting businesses negotiate property tax rates in certain circumstances.

BC’s finance minister thanks the commission, but offers no commitment to bring any of these ideas into reality. Mike de Jong says a value added tax will be considered, but adds it’s a big change to how things are done. “It would be a very significant shift and, as the commissioners themselves point out, it would require an extensive period of consultation and discussion with British Columbians. So, I wouldn’t hold your breath the see that recommendation acted upon in the forthcoming budget. It’s something the government would have to study.”

The BC Business Council says the PST is an antiquated tax, which has become a big deterrent to business. Chief Economist and VP of the council Ken Peacock says the sales tax isn’t equal province to province, which hurts BC’s chances. “Alberta has no PST so, cost advantages are higher in Alberta. It’s different across the states, but ultimately, it ends up driving up the cost of doing business by having a PST rather than a value added tax system.”

Peacock adds the switch may actually bring prices down for consumers.