The British Columbia 2009 budget update was tabled on September 1, 2009. The focus of the budget is on
economic recovery including maintaining vital services during difficult times,
stimulating the economy and creating jobs through infrastructure spending. The
budget forecasts a deficit of $2.8 billion in 2009/10, $1.7 billion in 2010/11
and $945 million in 2011/12. It is expected that the province will return to a
balanced budget in 2013.
Included in this budget are some additional details about the province’s
plan to harmonize its provincial sales tax (PST) with the federal Goods and
Services Tax (GST), effective July 1, 2010. The budget
indicates that additional specific and transitional rules are coming soon.
A summary of the key tax changes included in the budget are set out
below.
Business Tax Changes
Small business tax reductions
Effective January 1, 2010, the maximum amount
of taxable income to which the small business corporate income tax rate may be
applied will be increased from $400,000 to $500,000. This increase will amount
to up to $8,000 in annual tax savings for eligible corporations. In addition,
in a press release accompanying the budget, the government announced its
intention to reduce the small business corporate income tax rate to 0% by April 1, 2012.
Basic training tax credits
Effective July 1, 2009, the basic training
tax credit is increased from 10% to 20% of wages paid to an eligible apprentice
to a maximum of $4,000 per year.
Personal Tax Changes
Basic personal tax credit
Effective January 1, 2010, the basic personal
tax credit will increase from $9,373 to $11,000 (a $1,627 increase). In
addition, the spouse and equivalent to spouse credits will increase by $1,627
above the 2009 amounts. These increases will amount to tax savings of approximately
$72 for single taxpayers and $147 for taxpayers claiming a spouse or equivalent
to spouse credit.
B.C. mining flow-through share tax
credit
The B.C. mining flow-through share tax credit has been extended for an
additional year to the end of 2010.
Harmonized Sales Tax
It was announced on July 23, 2009 that the BC
government intends to introduce a harmonized sales tax (HST) of 12% effective July 1, 2010, which combines the provincial sales tax
(PST) with the federal Goods and Services Tax (GST). The September 1, 2009 budget update contained limited
further detail pertaining to the proposed HST. Outlined below is an overview of
the details announced to date.
HST rebates and tax credits
There are many goods and services currently not subject to PST that will
be subject to HST. Some examples are the following: haircuts, basic cable TV,
dry cleaning, airline fares, and accounting fees. There are, however, many
concessions that have been announced to date.
Point-of-sale rebates:
Point of sale rebates are similar to PST exemptions in that consumers do
not have to pay at the time of purchase. The following point-of-sale rebates have
been announced for the provincial potion of the HST (7%):
Gasoline, diesel fuel, marine diesel
and aviation fuel including biofuels components for motor vehicles, boats and
aircraft;
Child-sized clothing and footwear (this
does not include adult-sized clothing purchased for children under the age of
15, which is currently PST exempt);
Books, children’s car seats and
booster seats, diapers and feminine hygiene products; and
Residential energy.
New housing rebate:
New housing is currently not subject to PST, but will be subject to HST.
However, a partial rebate of 5% of the purchase price to a maximum of $20,000
will be provided. The theory behind this 5% rebate is that imbedded in the cost
of new housing is approximately 2% in PST paid on construction materials, which
will be eliminated with the implementation of HST. Effectively, there will no
tax increase on housing valued at less than $400,000.
Low-income credit:
An annual HST credit to be provided along with the quarterly GST credit
payments has been proposed. The maximum amount of the credit would be $230 for
individuals with income up to $20,000 and $230 per family member for
families with income up to $25,000. The credit would be phased out by 4% of
income above the thresholds.
Motor fuel tax and carbon tax:
Along with the point-of-sale rebate on motor fuels, the motor fuel tax
or carbon tax payable on those fuels would also receive a point-of-sale rebate
for the provincial portion of the HST. However, HST will be applied to the
purchase price (including any motor fuel tax or carbon tax) on all other fuels.
Municipalities, charities and
non-profit organizations:
For entities that qualify for the federal municipal GST rebates, a
rebate of 75% of the provincial portion of HST will be provided and for charities
and not-for-profit organizations that are eligible for federal GST rebates, a
rebate of 57% the provincial portion of HST will be provided.
Large-business restrictions
It is proposed that businesses with annual taxable sales in excess of
$10 million and financial institutions will have temporary restrictions of up
to five years (and then phased in over the following three years) on the
provincial portion of the input tax credits they can claim. These restrictions
would include:
Energy, except where purchased by
farmers or used to produce goods for sale;
Telecommunications services other
than internet access and toll-free numbers;
Road vehicles weighing less than
3,000 kilograms; and
Food, beverages and entertainment.
These restrictions would not apply to any items purchased for resale.
HST-related measures
As a result of the implementation of HST, the following levies and taxes
will be eliminated:
The Innovative Clean Energy levy, a
0.4% tax on purchases of electricity, natural gas, fuel oil and grid-propane
for non-transportation purposes;
The battery levy of $5 imposed on lead-acid batteries over 2 kilograms;
The Passenger Vehicle Rental Tax of $1.50 per day;
The 3% surtax on motor vehicles over $55,000; and
The 7% sales tax imposed on parking in the Greater Vancouver Area.
As a result of the implementation of HST, the following changes to other
tax measures were announced:
Private sale of used vehicles,
aircraft and boats will not be subject
to HST but will remain subject to PST;
Exemption of the current 2.7 cents/litre motor fuel tax on propane for use
in vehicles; and
The 8% hotel room tax will be replaced by the 7% provincial portion of
HST. The existing 2% additional hotel room tax for eligible local governments
will be extended to June 30, 2011
Other Sales Tax Changes
Carbon Tax Act
Renewable fuels:
Effective January 1, 2010, ethanol and biodiesel
will become subject to the carbon tax and will be taxed as gasoline and diesel fuel.
However, the applicable carbon tax rates will be reduced by 5% to reflect that
these fuels are carbon neutral over their life cycle.
Natural gas and natural gas liquids:
Effective January 1, 2010, the distinction
between raw natural gas and marketable natural gas is being removed and carbon
tax will apply in the same manner to both. In addition, two new fuels, pentanes
plus and gas liquids, will be subject to carbon tax.
Non-energy use of fuels:
Effective September 2, 2009, petroleum coke,
when used as a reductant in the production of lead or zinc, and fuel when used
as antifreeze in natural gas pipelines, will be exempt from the carbon tax.
Commercial air and marine services:
Retroactive to July 1, 2008, fuel used for
interjurisdictional flights that provide services to the public such as aerial
surveying and photography will be exempt from the carbon tax. In addition,
clarification regarding exemptions and refunds for fuel used by commercial
marine services will be provided.
Motor Fuel Tax Act
Effective January 1, 2010, ethanol and
renewable diesel fuels will be taxed at the same rate as the fuel with which
they are blended or, when sold as pure ethanol or biodiesel, will be taxed as
gasoline and diesel fuel.
Assessment Act
Pipelines, fibre optic cables, railway tracks and other continuous
structures will be valued using the same rates that were used for the 2009
taxation year. This is in an attempt to ensure that such structures are not
valued at the peak of the market and are treated consistently with other
property types.
Medicare Protection Act
Effective January 1, 2010, Medical Services Plan premiums will increase
by approximately 6%; this is the first increase in premiums since 2002. As a
result, premiums will be increased by approximately $36/year in for individuals
and $72/year for families. However, the premium assistance program will be
enhanced to reduce or eliminate monthly premiums for many taxpayers, with an
increase to the adjusted net family income thresholds.
