On March 2, 2010, Finance Minister Colin Hansen presented British Columbia’s 2010 budget. The 2010 budget was developed with a goal of creating a foundation for economic growth in British Columbia, protecting vital services, enhancing the province’s competitiveness and building on the energy created by the 2010 Olympic and Paralympic games. The British Columbia government also committed to using all revenues created by the Harmonized Sales Tax (“HST”) as funding for health care services.
In addition to focusing on reducing the deficit, this year’s budget includes several commodity tax changes.
Carbon Tax Measures
Effective March 3, 2010, the definition of “natural gas” is clarified to include acid gas and waste gas, even when they have been removed from the natural gas. In addition, as of March 3, 2010, vendors selling fuel in British Columbia without being appointed as a collector under the Carbon Tax Act will be subject to a penalty. The maximum penalty is twice the amount of security the vendor would have been required to pay had the vendor been appointed a collector.
Effective July 1, 2010, propane will be subject to the Carbon Tax security requirements which apply to most fuels, including gasoline and light fuel oil, and the tax rate for kerosene will be increased to 5.22 cents per litre from 5.08 cents per litre.
As required under the Carbon Tax Act, the government also reported that it achieved revenue-neutrality in respect of the Carbon Tax for 2009/2010.
Motor Fuel Tax Measures
As announced in the September 2009 Update, propane used in motor vehicles will be exempt from motor fuel tax, effective July 1, 2010. Note that propane is not eligible for the point-of-sale rebate on the provincial component of the HST available for motor fuels. The government also introduced a penalty for vendors who sell fuel in British Columbia without being appointed as a collector. Similar to the Carbon Tax measure, the maximum penalty is twice the amount of security the vendor would have been required to pay had the vendor been properly appointed as a collector. Social Service Tax Measures
The government announced that it will provide the following transitional provincial sales tax (“PST”) refunds related to the introduction of the HST:
- A refund for contractors for PST paid on construction materials purchased and held in inventory as of June 30, 2010, where the materials are used by the contractor on or after July 1, 2010 to repair or improve residential real property under a contract to which the HST applies. This refund is not available in respect of the construction of residential housing for which the PST Transitional New Housing Rebate is available. Similarly, the refund is not available if the PST is recoverable by the contractor or any other party; and
- Effective July 1, 2010, a refund will be available for eligible business purchases of goods and services paid for after October 14, 2009 and before May 1, 2010, which are delivered or performed on or after July 1, 2010 and are used exclusively in commercial activities as defined under the Excise Tax Act. The refund is designed to ensure that tax is not payable by businesses that would have been eligible for input tax credits under the HST, had the timing for payment been on or after May 1, 2010. A similar rebate will be available for purchases during the same period by certain organizations required to self-assess HST under the transitional rules, in order to prevent both HST and PST from applying to the same transaction.
In both cases, the refund application must be received by the government on or before December 31, 2010.
Hotel Room Tax Measures
With the introduction of the HST, the Hotel Room Tax will be eliminated. To ensure that the Hotel Room Tax is not collected on accommodation that is subject to the HST, the province will introduce certain transitional provisions. Furthermore, the additional 2% Hotel Room Tax for certain eligible local governments that is used to fund tourism marketing will be extended beyond June 30, 2011, while the design of the future structure of the program is developed.
Consumption Tax Rebate and Transition Act
The Consumption Tax Rebate and Transition Act (the “Act”) will be introduced to assist with the transition to the HST and the elimination of the Social Service Tax and the Hotel Room Tax. The residential energy credit, tax on the private sale of vehicles and the point-of-sale rebates created as part of the HST will be established and administered under this Act. In addition, this Act will force the Minister of Finance to disclose, on an annual basis, the difference between the province’s expenditures on health care and the revenues achieved from the provincial component of the HST, MSP premiums, tobacco tax and lottery revenues.
Residential Energy Credit
The province has introduced a provincially administered credit for the provincial component of HST on residential energy, as announced in the September 2009 Update. The credit will apply to the provincial component of the HST paid or payable on or after May 1, 2010, for qualifying purchases of residential energy provided on or after July 1, 2010. Energy qualifying for the credit will include electricity, natural gas, propane, heating oil (including biodiesel), heat, steam, firewood and pellets. Residential users that consume energy for both residential and non-residential use, which is not tracked by separate meters, will not receive this credit on their utility bill. Instead, these users will have to apply directly to the Minister of Finance for the credit due on the energy used for residential purposes.
Tobacco Tax Act Measures
The province has issued a clarification on the calculation of the 77% tax on cigars. As of March 3, 2010, this tax will apply to: the retail cigar price where the retail dealer selling the cigar either manufactured the cigar in Canada or imported the cigar into Canada; or, in all other cases, the wholesale price, plus a mark-up at 30%. In addition, the maximum tax payable per cigar has increased to $6 from $5.
The Tobacco Tax Act will also be amended to allow for the imposition of an annual fee that will be payable by retailers as a condition for being permitted to sell tobacco products in British Columbia. The details of this fee, including the amount, start date and any accompanying compliance obligations, will be released sometime in 2010.
South Coast British Columbia Transportation Authority Act
Commencing July 1, 2010, the Translink parking tax will be transferred from the Social Service Tax Act to the South Coast British Columbia Transportation Authority Act. This transfer is necessary to ensure that the parking tax continues once the Social Service Tax is eliminated on July 1, 2010. Parking tax is calculated on the purchase price of parking supplied in the South Coast British Columbia Transportation Service Region. This includes parking rights that are sold by the hour, month, year or any other basis. The Ministry of Finance collects the tax on behalf of TransLink. Effective January 1, 2010, the rate of parking tax collected by TransLink was set at a rate of 21%.
Other Tax Measures and Programs
The government reaffirmed the elimination of the following taxes and levies, as announced in the September 2009 Update:
- $1.50 per day Passenger Vehicle Rental Tax;
- The surtax on motor vehicles over $55,000;
- $5 per battery environmental levy; and
- 0.4% Innovative Clean Energy (“ICE”) Fund levy.
In addition, the multijurisdictional vehicle tax will be eliminated for multijurisdictional vehicles that have licence years beginning on or after July 1, 2010.
This budget also reintroduced a number of measures that were announced in the September 2009 Update and in subsequent publications. These measures, for the most part, relate to the implementation of the HST on July 1, 2010, including point-of-sale rebates and public service body rebates for the provincial component of the HST, general transition rules, new housing and rental housing rebates, and the recapture of input tax credits. Other carryover measures dealt with the elimination of various levies, taxes and surtaxes, the tax on the private sale of used vehicles, aircrafts and boats, and the adjustment of the liquor mark-up.
Further information on British Columbia’s 2010 budget may be found on the province's web site and these documents:
Budget 2010 - Province of British Columbia
Budget 2010 - Consumer Taxes
Budget and Fiscal Plan
Budget 2010 Tax Change Summary