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September 1, 2009 |
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Highlights of the 2009 B.C. Budget Update British Columbia Finance Minister Colin Hansen tabled the province’s 2009 budget update today on September 1, 2009. The budget forecasts a deficit of $2.8 billion in 2009/10, $1.7 billion in 2010/11 and $945 million in 2011/12.
Among the tax changes included in this budget are some additional details about the province’s plan to harmonize its provincial sales tax (PST) with the federal Goods and Services Tax (GST), effective July 1, 2010. Although the budget does not set out general transitional rules for implementing the Harmonized Sales Tax (HST) or specific rules related to new housing transactions that straddle July 1, 2010, the budget indicates that these rules are coming soon. For more information on B.C. sales tax harmonization, see TaxNewsFlash-Canada 2009-23 dated July 23, 2009.
Highlights of tax changes included in today’s budget are set out below. Business Tax Changes
Small businesses
As of January 1, 2010, the maximum amount of taxable income to which the small business corporate income tax rate may be applied will be increased to $500,000 (from $400,000). This increase will amount to up to $8,000 in annual tax savings for eligible corporations. In a press release accompanying the budget documents, the government announced that it plans to reduce the small business corporate income tax rate to zero (from 2.5%) by April 1, 2012.
Basic training tax credit
Before July 1, 2009, the basic training tax credit for employers was calculated as 10% of wages paid to an eligible apprentice to a maximum of $2,000 per year. As announced on April 7, 2009, the basic training tax credit is doubled to 20% of wages paid to an eligible apprentice to a maximum of $4,000 per year, as of July 1, 2009.
Personal Tax Changes
Basic personal tax credit
The basic personal tax credit amount will rise to $11,000 (from $9,373), as of January 1, 2010, up by $1,627 from 2009. For single tax filers, the increase will be worth about $72 in additional tax savings in 2010. The spouse and equivalent-to-spouse credits will also be increased by $1,627 over 2009 amounts.
B.C. mining flow-through share tax credit
The B.C. mining flow-through share tax credit is extended to the end of 2010.
Sales Tax Changes Harmonized Sales Tax
HST rebates on residential energy
The British Columbia government has already announced point-of-sale rebates for the provincial portion of HST on books, children’s clothing and footwear, children’s car seats and booster seats, diapers and feminine hygiene products. In today’s budget update, the government announced that it will also provide rebates of the provincial portion of HST on energy purchased for residential use.
Rebates for municipalities, charities and qualifying non-profit organizations
British Columbia will provide rebates of 75% of the provincial portion of the HST for entities that qualify for federal municipal GST rebates and 57% of the provincial portion of HST for registered charities and qualifying non-profit organizations that qualify for federal GST rebates.
There was no announcement concerning rebates of the provincial portion of HST for health authorities, universities, colleges, or schools. We understand that the government plans to review the grants it pays to these institutions in light of any increased provincial tax they will pay under the HST regime.
Other HST–related measures
Elimination of various levies and taxes
The budget announces that the following levies and taxes will be eliminated due to the implementation of HST:
· The Innovative Clean Energy levy, a 0.4% tax on purchases of electricity, natural gas, fuel oil and grid-propane for non-transportation purposes · The battery levy of $5 imposed on lead-acid batteries over 2 kilograms; · The Passenger Vehicle Rental Tax of $1.50 per day; · The 3% surtax on motor vehicles over $55,000; and · The 7% sales tax imposed on parking in the Greater Vancouver Area.
Motor fuel tax on propane
Propane used in motor vehicles will not be eligible for the point-of-sale rebates proposed for the provincial portion of HST on other motor vehicle fuels. Consequently, the province announced that such propane will be exempt from the current 2.7 cents/litre motor fuel tax with the implementation of the HST.
Liquor markups
Liquor is currently taxed at the rate of 10%. With the implementation of HST, the provincial portion of the HST on liquor will be only 7%. The province will adjust liquor markups to ensure that retail shelf prices will remain constant.
Tax on private sales of used vehicles
Private sales of used vehicles, aircraft and boats are currently subject to PST but not GST and so they will not be subject to HST. The province will retain a provincial sales tax that will reflect the current tax treatment of these items.
Hotel room tax
The 8% hotel room tax will be replaced by the 7% provincial portion of HST. The 2% additional hotel room tax for eligible municipal governments will be retained until June 30, 2011.
Carbon tax
Renewable fuels
As introduced in 2008, as of January 1, 2010, the total volume of gasoline and diesel fuel sold in the province must contain an average of 5% renewable fuel (i.e., ethanol and biodiesel). Beginning January 1, 2010, ethanol and biodiesel will be subject to carbon tax. Ethanol and biodiesel will be taxed as gasoline and diesel fuel, but the carbon tax rates will be reduced by 5% to reflect that ethanol and biodiesel are carbon-neutral.
Natural gas and natural gas liquids
The distinction between raw natural gas and marketable natural gas is being removed as both have the same carbon dioxide emissions and are taxed at the same rate. Two new fuels — pentanes plus and gas liquids — are added to the list of taxable fuels.
Non-energy uses of fuels
Petroleum coke that is used as a reductant in the production of lead or zinc and fuel that is used as anti-freeze in a natural gas pipeline will be part of the exemption for non-energy uses of fuel as of September 2, 2009.
Commercial air and marine services
The exemptions for commercial air services will be expanded to include fuel used for inter-jurisdictional flights that provide services such as aerial surveying and photography. In addition, the exemptions and refunds for fuel used by commercial marine services will be clarified. These changes have effect from July 1, 2008.
Motor fuel tax
As of January 1, 2010, ethanol and biodiesel will be subject to motor fuel tax at the same rate as the fuels with which they are blended or, when sold as pure ethanol or biodiesel, as gasoline and diesel respectively.
Social service tax
The social service tax rules will be amended as of September 2, 2009 to clarify the application of the tax to tangible personal property that is leased and which becomes real property on installation.
Property tax assessments
Pipelines, fibre optic cables, railway tracks and other continuous structures will be valued using the same rates that were used for the 2009 taxation year. This treatment aims to ensure that such structures will not be valued at the peak of the market and so will be treated consistently with other property types.
Medical Services Plan premiums
Medical Services Plan premiums will be increased by approximately 6% effective January 1, 2010. As a result, single individuals will pay about $36 more in premiums annually, while families will pay about $72 more each year. We can help Your KPMG adviser can help you assess the effect of the tax changes in this year’s British Columbia budget update on your personal finances or business affairs, and point out ways to take advantage of their benefits or ease their impact. We can also keep you abreast of the progress of these proposals as they make their way into law and help you bring any concerns you may have to the attention of the B.C. Ministry of Finance.
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Information is current to September 1, 2009. The information contained in this TaxNewsFlash-Canada is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500. KPMG LLP, a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG, a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 144 countries and have more than 104,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. KPMG International provides no client services. KPMG's Canadian Web site is located at www.kpmg.ca © 2009 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. |