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Why the Election Was a Missed Opportunity to Fix PST

October 10, 2020 aadolphCOVID-19,CRA,GST,PST

The last time the BC Liberals tinkered with BC’s sales tax, it exploded in their face.

Their election pledge to reduce the PST to 3% for one year and then raise it back up was poorly received. It would not have helped the typical business unless they were planning to make a capital purchase this coming year. Not likely. Abrupt changes in tax rates are difficult to administer, and to whipsaw the rate back and forth over a two year period would be chaotic. Changes to tax rates should be phased in slowly.

The Liberals should have promised to replace the PST with a system that works like GST. One that encourages exports instead of making them more expensive than other provinces.

GST’s 30th Birthday Coming Up

Sales taxes are better than income taxes, and GST is better than PST.

With GST, there is no sales tax built into the cost to produce exports (except in BC). Businesses can claim back the GST on their purchases. With PST, they can’t, making us less competitive, especially internationally, when compared to the rest of Canada (except Saskatchewan and Manitoba. Getting rid of PST would make our exports more competitive on the market because our exporters wouldn’t have to pay PST on the equipment they need to produce those exports.

GST is also much easier for businesses to understand. The government would not have to “re-harmonize”. They would simply make changes to the legislation to virtually mirror the GST legislation. The provincial would still be able to set its own rate, and have different rates for different things, although simpler is better.

GST has been with us for nearly 30 years, and is fairly popular compared to its rival taxes due to its simplicity. One of the major concerns yo hear when contemplating ditching the PST system for a GST system is that it unfairly benefits business. The naysayers don’t seem to realize that these are consumption taxes, after all.

Maybe now is the time, with people seeing businesses closing up and wanting to do more to support them.

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Andrew Adolph

Andrew Adolph is a CPA and former CRA auditor with 25 Years of experience. He helps businesses to not par any more in sales taxs than the law says they must and acts as an advocate for you if you are being audited, so you can fous on your business.