Some Questions and answers about the change back to GST/PST

February 17, 2012
by Jared Cross, C.P.A, C.G.A
Will the PST be re-implemented at 7%? 
Yes, as determined by the results of the referendum, the seven per cent PST will be reinstated in B.C. The Province may make some common sense administrative improvements to streamline the PST legislation and ease the transition for businesses.
Will all permanent PST exemptions return?
Yes, permanent PST exemptions will return with the re?implemented PST.
When will the PST be re-implemented?
Dismantling the provincial HST and reinstating the PST will take time to do properly. We are not setting a firm transition date yet, but we are targeting March 31, 2013.
Transition Back From HST
Why does it take so much longer to go back than to implement the HST?
Changing a province’s tax system is a complex undertaking for both business and government. There are a series of steps that need to be taken, and as the HST Independent Panel report stated, going back to the PST will take 18-24 months.
Why was the HST easier to implement than bringing back the PST?
With harmonization, B.C. was really just eliminating one tax, the PST, and changing the rate of an existing tax that businesses were already familiar with. While there are some minor differences, like the point of sale rebates, basically the HST was just the GST at a higher rate (i.e., 12 percent HST instead of 5 percent GST).
What are the steps involved in re-implementing the PST?
Re-implementing the PST is not just changing the rate of an existing tax. The PST will be a second sales tax with its own set of rules and procedures that are separate from and in addition to those that businesses have to follow for the GST.
The Province needs to develop complex transitional rules in consultation with the federal government, rewrite provincial tax laws and regulations, and rebuild its capacity to administer the PST.
Businesses will need to readjust their accounting and administrative systems to prepare for collecting a second sales tax.  

Will we need to pay back the $1.6 billion the Province received from the Government of Canada?
The Province has concluded an agreement with the Government of Canada for the repayment of the $1.6 billion in transition funding it received when B.C. moved to the HST.

Under the new agreement, the Province will have five years to repay in full the transition funding, and Canada has agreed to waive any interest charges over this period. The extended repayment schedule will save the Province debt interest costs that would otherwise have been incurred had the Province been required to repay the full amount right away. 

For more information please visit http://www.pstinbc.ca/

 
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