Strong sentiment remains on both sides of the fence, but either way, come April 1, 2013, British Columbians will say goodbye to the HST and be forced to reacquaint themselves with the PST/GST system.
Some welcome the changes. Former B.C. premier Bill Vander Zalm, who led the Fight HST campaign, told Business in Vancouver that because Canada is largely an export economy, the HST drains money from the consumer with no benefits to the province. He added that small businesses are hit hardest by the HST because it drains away money that could be spent at the local level.
"This tax hurts the economy. I've argued that right along."
Ian Tostenson, president and CEO of the BC Restaurant & Foodservices Association, also favours the return to the PST/GST. He said there was a drop in sales of about 8% industry-wide when the HST was introduced in July 2010.
"We had a problem with putting [extra tax] on a consumer item in a recession," he said.
But Gabrielle Loren, founding partner and executive account manager of Loren, Nancke & Company Certified General Accountants, said the reversion to the old tax regime will cause many small businesses a lot of administrative headaches.
"A lot of them ended up getting new updated systems that allowed for the HST transition," Loren said. "They invested a lot of capital getting themselves set up, and now all of a sudden they have to go back again."
Not only do they have to bear the cost of switching the systems back, she said, but filing the returns will be much more complicated.
Loren estimated that the HST reduced bookkeeping time for many businesses between 10% and 15%, and the switch back to the PST/GST system will remove those savings.
Peter Leitch, president of North Shore Studios and Mammoth Studios and chairman of the Motion Picture Production Industry Association of BC, agreed. He said the film industry will be significantly affected by the HST's removal.
"[The return to the PST] … is going to cost us an extra 7% on goods and services. It's just another competitive disadvantage."
Prepare early for return of PST
Some points to consider in the leadup to the April 1, 2013, return to PST/GST regime:
Budget
Capital and operating budgets might be affected because the PST is non-recoverable.
Input tax credits
Any purchases not related to goods being resold are currently eligible for input tax credits (ITCs) for the entire amount of the HST; after April 1, 2013, only the GST portion will be refundable, so accelerating purchases now might be a good idea.
Lease versus buy
Leases are taxable and financing arrangements are not, so leases bought out before April 1 will be eligible for ITCs.
Document changes
Contracts, invoices and receipts might need to be reformatted and reworded to reflect the different tax system.
IT changes
System changes and reprogramming may be required, including changes to tills and other equipment.
Cash flows
The amount and timing might be affected.
Monthly tax returns
An additional return will need to be filed every month when the PST returns.
Exemptions
PST exemptions apply to some goods and not to others.
Training
The return to the old system will likely require staff retraining.
Purchases from other provinces
PST will need to be self-assessed on any goods bought from outside of B.C.
Capital assets
Asset depreciation and amortization schedules will likely be affected.
