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The B.C. government presented its 2016 / 2017 Budget on February 18, 2016. The Finance Minister made an interesting announcement of their intention to hire someone to evaluate the competitiveness of the B.C. PST. Needless to say, bringing up HST would not be a crowd pleasing move for the Finance Minister to make at this time.
For the majority of business owners, PST is not an intuitive tax with clear rules. In fact, the 7% PST increases the overall cost of doing business, unlike the 5% GST, which is refundable to most businesses.
The efficiency of a tax is lost when it is paid at multiple levels of the supply chain on indirect costs, creating a cascading effect. From a competitiveness perspective, the tax erodes the attractiveness of setting up businesses in B.C. or continuing to do business in B.C. In fact, the PST on large capital intensive projects can be a significant deal breaker.
For instance, let’s suppose you want to open a restaurant in B.C. A $100,000 kitchen will actually cost you $107,000 with PST. PST is applicable (either directly or indirectly) on the stoves, ovens, fridges, tables, chairs, linen, dishware, cabinetry, flooring, lighting and signage. Should you decide to purchase items from out of province vendors where sales taxes differ, the business owner or tax manager will be responsible for understanding the tax well enough to self-assess the PST and remitting the tax voluntarily.
At the end of the day, there is no denying that the inefficiency of the PST contributes to the increasingly high cost of doing business in B.C. Tweaking the PST does not modernize it. In fact, this may only cause it to become even more convoluted and complex to work with.
PST might be here for the short-term, but considering it as a long-term solution, is just bad for business.
For more information as to how B.C.’s 2016 / 2017 budget could affect your business, contact Angela Chang, CPA, CGA at 604.685.8408 or [email protected].
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