“Fix the PST” says Burnaby Board of Trade at BC Budget Hearings
As part of the 2016 Budget Consultation process, the Burnaby Board of Trade has made a submission to the Select Standing Committee on Finance and Government Services calling on the provincial government to fix the Provincial Sales Tax (PST) by removing the tax on key business investments in new equipment, machinery and software with the creation of a refundable input tax credit.
April 1st of this year marked the two-year anniversary of the return of the PST from the previous Harmonized Sales Tax (HST) regime. Businesses in BC used to be able to claim a credit for the taxes paid on equipment and software investments under the HST, but the switch back to the PST eliminated those credits, effectively amounting to a 7% tax increase on key investments. This has led to BC having one of the worst Marginal Effective Tax Rates for business investment in the country.
“While the BC Government has succeeded in making BC more competitive by many measures, the taxes paid on capital investment is an outlier that forces BC companies to pay more than business in most other provinces and serves as a drag on business investment,” remarked Burnaby Board of Trade president and CEO Paul Holden. “By implementing an input tax credit for new equipment, machinery and software in particular, the government could help invigorate business investment in the province and help boost the competitiveness of our local firms, and drive economic output.”
With a $1.68 billion surplus in the 2014/15 fiscal year, and projected surpluses of $1 billion over the next three years, the Burnaby Board of Trade believes now is the time to act.
“We recognize and support the government’s need to be fiscally prudent and we’ve applauded the return to a balanced budget in recent years. However, with the surpluses expected over the next three years, there is certainly fiscal room enough to implement some PST reform for businesses,” said Holden.
The Burnaby Board of Trade hopes to see at least some implementation of a refundable input tax credit in Budget 2016, with the goal of eventually phasing in a full 7% PST input tax credit for equipment, machinery and software in the future.