On November 15, 2011, Tax Executives Institute submitted a letter to the British Columbia Ministry of Finance containing a number of improvements to make the Provincial Sales Tax ("PST") more efficient and administrable. As a follow up to that letter, three members of TEI's Canadian Commodity Tax Committee met with officials from the Ministry on December 12, 2011 to further discuss the Institute's proposals. The letter and subsequent meetings follow on the heels of a provincial referendum earlier in the year where residents of British Columbia approved a repeal of the Harmonized Sales Tax and a reinstatement of the PST. On August 26, 2011, the Ministry published its Action Plan to Reimplement the PST noting that the process would include consideration of "common sense administrative improvements to streamline the PST." TEI's letter identified areas where exemptions from the PST could be streamlined or otherwise improved. Those areas included production machinery and equipment exemptions, and related party transactions. TEI also noted that the PST rules applicable to software licenses are out-of-date and further improvements are required to address the tax treatment of newer technologies. For example, the definitions for basic phone and cable services will not accommodate new bundling options commonly offered by telecommunication service providers. "The transition back to the PST in British Columbia will significantly impact all businesses with operations in the province," noted TEI President David M. Penney of General Motors Canada Limited. "It will require investments in both IT and tax department resources at a time when both are in short supply. TEI stands ready to assist the Ministry of Finance with the implementation of transitional rules and its efforts to identify areas of improvement that would make the PST more efficient and administrable to the benefit of both taxpayers and the province."
The December 12 meeting began well as the Ministry appreciated that TEI's letter was not a tirade but a list of practical suggestions on how to improve the administrative processes of the PST in ways that were revenue neutral to the province and non-controversial to TEI's membership. David A. Card, from Spectra Energy Corporation, Brian A. Moul, from BC Hydro & Power Authority, and Michael J. Willis, from Lafarge Canada Inc., the TEI members who attended the meeting, went through the various areas identified in the letter and provided concrete example of how they affected businesses. Additionally, the TEI members at the meeting asked when the Ministry would announce the date the PST would become effective. Early indications were that the reimplementation would occur approximately 18 months from the release of the Ministry's "Action Plan" in August 2011, and Ministry officials indicated that the exact date remains uncertain. The TEI representatives urged the Ministry to release transitional rules as soon as possible to allow businesses to begin planning for changes to IT systems, training, and other areas of businesses affected by the return to the PST. While the Ministry reiterated its openness to suggestions to improve the PST, they did note that they were working under the premise that the tax would be substantially the same as that in place prior to the HST. Still, the Ministry will have a new system in place to process returns and collections.
The remainder of the meeting included extensive discussions on manufacturing and production exemptions, more generous exemption rules for reorganizations, and improvements to the appeals system. Also, TEI members requested that the Ministry provide some flexibility to allow taxpayers to develop cost effective solutions to transition from the HST to the reintroduced PST. "Undoubtedly, the transition will present challenges to taxpayers and the Ministry," stated Mr. Penney. "It is only by working together to identify and address areas of significant concern that this transition can be made workable." In anticipation of the Ministry creating an expert tax panel, the TEI representatives suggested that TEI have a position on the panel or at least that the panel remain open to receiving additional comments from TEI. In his speech to the Vancouver Board of Trade on January 10, 2012, Finance Minister Kevin Falcon announced the appointment of an Expert Panel on Tax to provide analysis and recommendations to the Province on business tax competitiveness and administrative improvements to streamline the PST. This meeting shows again how the hard work of TEI members can result in positive change for taxpayers. Hats off to the Canadian Commodity Tax Committee, and especially to Dave, Brian, and Mike, for their contributions to this effort.