July 2, 2010, Victoria, B.C. – The following is an HST backgrounder posted by the provincial government in British Columbia. Like Ontario, its new harmonized tax came into effect on July 1. According to the province, “introducing the HST is an essential step to make B.C. businesses more competitive and encourage new investment.”

Currently, the PST exemption list-based system for bona fide farmers and aquaculturists is considered unwieldy, hard to update with respect to new technologies and places the burden for compliance on retailers rather than the farmers and aquaculturists who receive the benefit of the exemption. Under the current system, bona fide farmers and aquaculturists receive a PST exemption at the time of sale only on purchases of specifically listed items used solely for farm or aquaculture purposes.

Under HST, some major inputs such as certain tractors and harvesting equipment will be zero-rated, meaning that there will be no HST payable on the purchase of the equipment. For goods and services on which HST is payable, farmers and aquaculturists will be eligible to claim Input Tax Credits (ITCs) provided the goods and services are purchased for use in their business. These goods and services include many items currently taxable under PST, such as trucks, light vans and parts, repairs to vehicles, office furniture, computers and construction equipment. Farm inputs that are currently exempt from the PST will also be eligible for an ITC.

Consumers will not pay any HST and do not currently pay GST on agriculture and fishing products such as livestock, grains and seeds, or tractors.

For technical information, visit www.cra-arc.gc.ca/harmonization.

B.C.’s resource sectors are expected to benefit significantly from the Harmonized Sales Tax (HST) as their business inputs and exports will no longer be taxed. In total the HST will remove about $2 billion in costs from B.C. business, enhancing their competitiveness, encouraging investment and resulting in more jobs.

The HST will make B.C. one of the most competitive jurisdictions not only in Canada, but in the industrialized world. B.C. will have the lowest harmonized tax rate in Canada. Adoption of the HST when fully phased-in will result in B.C.’s taxes on business investment being lower than neighbouring jurisdictions, including Alberta. This means rural communities will be an attractive place for investment to create long-term stable and well-paying jobs.

For more information on the Harmonized Sales Tax, visit: www.gov.bc.ca/hst.