PLEASE NOTE THAT BC VOTERS HAVE OPTED TO SCRAP THE HST TAX
The BC government will seek to return to a Provincial Sales Tax within 18 months,
meaning the old tax will be restored by March 31, 2013. STAY TUNED FOR MORE INFO.
wondering what the major differences between the Atlantic
Canada Maritime HST and that of the newly introduced B.C.
HST are? Look no further as this article examines the differences
between the pre and post Harmonized Sales Tax processes
between Newfoundland, New Brunswick, Nova Scotia and now
British Columbia. Some fundamental differences between the
BC HST versus the Maritime HST are quite surprising, but
the BC Liberal Government certainly has tried to squeek
this by the general public during the summer.
| The Maritime HST was introduced in 3 Maritime provinces
in 1997 including Newfoundland/Labrador, Nova Scotia and New
Brunswick. BC HST is set to be introduced in 2010.
| The Maritime HST REDUCED the combined tax rate upon introduction:
Newfoundland (from 19% to 15% to 13%) and Nova Scotia and
New Brunswick (from 18.7% to 15% to 13%). The BC HST DOES
NOT reduce the combined tax rate as it is 12% (7% PST plus
5% GST) making consumer goods and services more expensive
as most items were not previously taxed the 7% PST tax.
| The Atlantic Canada HST has INCREASED capital investment.
The B.C. HST should increase capital investment, but that
is yet to be determined.
| The Maritime provinces consulted with business and other
industries prior to the introduction of the Harmonized Sales
Tax. British Columbia did not consult with any industry or
consumer group prior to their announcement. The BC Liberal
Government also broke their election promise.
B.C. HST RESOURCES & HARMONIZED SALES
How Are the Maritime HST Taxes Different from
the B.C. HST? New Brunswick, Nova Scotia and Newfoundland HST
Versus BC HST
So what are the HST differences between the provinces? Is the
BC HST different then the Harmonized Sales Tax in the Maritimes?
There are some major differences between the Nova Scotia, Newfoundland/Labrador
and New Brunswick HST tax and that of the one in British Columbia,
but not many people understand how different they actually are.
Although the BC Government points to the Maritime HST as a comparable,
there are some big fundamental differences between the taxes,
especially considering that the total taxes in New Brunswick,
Nova Scotia and Newfoundland actually went DOWN after the harmonized
sales tax was implemented. This article discusses other differences
and provides information regarding the HST differences between
provinces in Canada.
So What’s The Deal – Is The BC Government
Implying That The B.C. HST Was Introduced for the Same Reasons
as the Atlantic Canada Maritime HST?
In late July 2009, the BC Liberal Government announced that the
Harmonized Sales Tax would be coming into effect in 1 years time
for July 1st, 2010. With the combination or harmonization of the
2 taxes in British Columbia, one would expect to see a tax break
for the public, but on the contrary, the 12% HST tax in BC actually
increases the tax burden on everyone. According to some analysis,
the BC HST versus the Maritime HST is very different. For one,
the Maritime HST (implemented by Newfoundland/Labrador, Nova Scotia
and New Brunswick) actually DECREASED the tax burden on the regular
consumer while it has proven to INCREASE capital investment in
the province’s industries. Back in 1997, when the Atlantic
Canada Maritime HST was introduced, the combination of the provincial
sales taxes with the federal GST actually would have resulted
in a Newfoundland HST at 19% and a Nova Scotia and New Brunswick
HST rate at 18.7%. However, this was not the case in 1997. Upon
the implementation of the Maritime HSTs, all 3 provinces opted
for the lower 15% Harmonized Sales Tax, effectively dropping the
total tax burden to consumers by 4% in Newfoundland and 3.7% in
Nova Scotia and New Brunswick. Therefore, the Atlantic Canada
Maritime HST actually REDUCED the total taxes paid for consumer
goods and services in all 3 provinces. Fast forward to today,
the Maritime HST of 15% has been again REDUCED to 13%. Through
the first 10 years of implementation of the Atlantic Canada HST
in the Maritime provinces, the Harmonized Sales Tax has been reduced
by 6% in Newfoundland and Labrador and 5.7% in the other two provinces
… a reduction in HST taxes by a whopping ~31.5%! It’s
great to be a resident there compared to BC at this moment!
Consultation with Business Industry and General
Public Is Another Major Difference Between the Atlantic Canada
HST Implementation and That of the B.C. HST Backlash
According the the Canadian Federation of Independent Business,
another key difference between the Maritime HST versus the BC
HST system is that Atlantic Canadian provinces consulted with
many business and industry groups before the tax was ever introduced.
The problem in British Columbia stems from the fact that the BC
Liberal Government broke their election promise about the introduction
of a provincial/federal HST tax and that they NEVER consulted
the business industry or any other industry groups like the construction
or hospitality industries that will see a major impact next year.
With plenty of surveys, round table discussions and consultation
in the Maritime provinces of Newfoundland, New Brunswick and Nova
Scotia, the Atlantic Canada HST went through many modifications
as different concerns and issues were brought up. These were ironed
out before the introduction of the Maritime HST including rebates,
rules and policies surrounding the tax situation for consumers.
However, in British Columbia, the BC HST tax has been introduced
without prior engagement with the hospitality or homebuilders
industries in addition to tourism. This leads us to the next difference
between the Maritime and BC situations. Currently, BC tourist
industry is not subject to the 7% PST tax, and therefore, the
introduction of the 12% HST effectively pushes up the tax rate
by seven per cent. Because tourists are so price sensitive, this
can have a detrimental effect on the BC tourism industry. However,
before the Atlantic Canada Maritime HST was implemented, all three
provinces applied their provincial taxes on the tourism industry.
Therefore, the introduction of the HST actually reduced the taxable
rate on the tourism industry in Newfoundland, Nova Scotia and
New Brunswick, giving the tourists a bigger break and more incentives
to plan their holidays in Atlantic Canada.
Comparing the Homebuilding Industries in Atlantic
Canada and B.C.
As indicated in several surveys and industry analysis, new housing
starts in Atlantic Canada where the Harmonized Sales Tax was introduced,
dropped up to 12% a year later. This is a significant drop that
affects thousands of professionals in the homebuilding industry.
As Atlantic Canada Maritime HST served to reduce the tax burden
on everyday goods and services, it is noted that the cost of housing
actually went up due to the Maritime HST. Any increase in home
ownership or homebuying in BC and especially in expensive markets
like Greater Vancouver, Victoria and the Okanagan will likely
decrease affordability to a point where it will cut out thousands
of people looking for new homes. This will gravely affect the
BC homebuilding industry.
One of the benefits that the BC Liberal Government is pushing
is that the 12% HST is of benefit to small business that take
advantage of the tax breaks and input tax credits that they can
claim. In addition, the BC HST reduces the marginal effective
tax rate on new business investment, which should increase the
competitive nature of the province against other regions. New
investment capital before HST implementation is at 27% and afterwards,
it will drop a significant amount to 16%. With any changes, it
is also noted that it takes time for people to adjust to taxes.
A majority of residents in the Atlantic Canada Maritime provinces
where the HST was adopted now support it. We’ll just have
to wait and see in BC and how this new harmonized sales tax will
affect consumers, various industries and investment capital in
VANCOUVER 2010 GUIDES AND CHECKLISTS