The newly released British Columbia budget will provide some electricity cost relief for customers in the commercial, industrial and institutional electricity sectors beginning in the fall of 2017. Business advocates are applauding the provincial government’s pledge to reduce the 7 per cent provincial sales tax (PST) on electricity to 3.5 per cent as of this October, and phase it out completely by April 2019.
“For more than a decade, BOMA BC has lobbied the Province for tax credits aimed at improving energy affordability for building owners and business tenants. We are delighted that our message has helped government craft a tax reduction that significantly benefits the built environment,” says Paul LaBranche, president of the Building Owners and Managers Association (BOMA) of British Columbia.
The promise follows through on a recommendation the provincially appointed Commission on Tax Competitiveness made in its November 2016 report to the Minister of Finance, in which it noted that B.C. is the only North American jurisdiction to charge retail sales tax on electricity. Even that has been levied inequitably since residential and farm customers are already exempt.
Once fully eliminated, the government estimates it will forego about $164 million annually in PST income. However, other projections in the 2017-18 budget are premised on 3.5 per cent average annual growth in collected PST revenue over the next three years.
“Government agrees with a common assessment expressed to the Commission that, as 98 per cent of British Columbia’s electricity is hydro-electric, charging PST on electricity works against a low-carbon economy and removing it would encourage green energy consumption,” the budget document states.
The government is not acting on the Commission’s calls to discontinue PST levied on software and telecommunication services, and to exempt business capital expenditures. These recommendations have been classified as “future considerations” that “will be considered in the context of the province’s fiscal situation and competing funding priorities”. Still, business groups are expressing patience for now.
“This is an important first step towards fixing the PST,” says Richard Truscott, vice president, B.C. and Alberta, of the Canadian Federation of Independent Business. “With the election quickly approaching, we hope to see further commitments from all parties towards a plan to support small business, especially how to finish fixing the PST.”