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Canada: Harmonized Sales Tax for British Columbia and Ontario

(Jan. 14, 2010) Recently, the governments of two Canadian provinces, British Columbia and Ontario, agreed to replace their provincial sales tax with a Harmonized Sales Tax (HST) to be collected by the federal government. In order for the HST to be extended to British Columbia and Ontario, the Parliament had to amend the Excise Tax Act. The Act to Amend the Excise Tax Act received Royal Assent on December 15, 2009. (2009 S.C. ch. 32, Parliament of Canada website,
(last visited Jan. 6, 2009); Canada Revenue Agency, GST/HST General Information, (last visited Jan. 6, 2010).)

In 1991, the Parliament of Canada enacted a Goods and Services Tax (GST). (Excise Tax Act, R.S.C. ch. E-15, as amended,< (last visited Jan. 6, 2010). The GST is a form of a value-added tax that is not imposed on exempted items and exported goods. When the GST was originally created, it was separate from all provincial sales taxes. Thus, all Canadian consumers buying non-exempted items were generally required to pay two separate taxes on them. The different provincial tax regimes all had their own rules as to what was and what was not taxable, and the provinces all had different rates. However, in 1997, the federal government and the governments of the three Atlantic provinces of Newfoundland, Nova Scotia, and New Brunswick signed agreements that allowed what is now the Canada Revenue Agency to collect a single HST in place of separate GST and provincial sales taxes and to share it with the provincial governments. The federal government later signed an agreement with the Government of Quebec that allows the province to collect the HST and share it with the federal government. This left six provinces, including British Columbia and Ontario, with two separate sales and value-added taxes.

In order to amend the Excise Tax Act to extend the HST to the two provinces, the minority Conservative government, led by Prime Minister Stephen Harper, needed the support of one of the other three parties represented in the House of Commons. The provincial governments had agreed to accept the HST because it promises to increase their revenues, but the HST has not enjoyed widespread consumer support in either province. (Jane Taber, Ignatieff to Support Harper on GST, THE GLOBE AND MAIL (Toronto), Dec. 1, 2009, available at
.) Nevertheless, the majority of the members of the Liberal Party supported their leader and voted with the Conservatives to enact implementing legislation. Failure to secure support for his government's bill could have resulted in the Prime Minister's calling of a general election; instead, Parliament has been prorogued until March 2010.

The federal GST was originally set at 7%, but has since been reduced to 5%. (Canada Revenue Agency, GST/HST General Information, (last visited Jan. 6, 2010).) The HST will be 13% in Ontario and 12% in British Columbia on July 1, 2010. (General Transitional Rules for Ontario HST, NEWSROOM [Ontario government website], Oct. 15, 2009, available at
; Harmonized Sales Tax: Creating Jobs, Lowering Prices, British Columbia Government website, (last visited Jan. 7, 2010).)