Major purchasing decisions for the future need to be made now, according to a tax specialist studying the looming provincial sales tax (PST) switchover approaching next April.
The coming switch back to the PST from the current, short-lived harmonized sales tax (HST), will mean different things to different individuals, agencies and companies, but getting a professional opinion should happen as soon as possible in order to save money on future transactions, said Angela Chang, a consumer tax specialist at Deloitte's regional head office in Vancouver. She was brought in by the Prince George Chamber of Commerce to speak to local business owners about the switch in tax systems from HST to PST.
Some businesses might deliberately overstock in advance of the switch, she explained, while consumers could make those big-ticket purchases sooner rather than later. Real estate deals may be hurried and leasing and financing agreements will be revisited.
"It is not as easy as flipping a switch," she said. "You may want to consider all your long-term contracts [with suppliers and service providers]. It is important to have your legal department make sure the wording incorporates the new tax. You want to watch out, too, for all the transitional rules coming out sometime in September."
For the average consumer, buying an item now versus after April 1, 2013, will mean a matter of only a few dollars more or less, but the implications for businesses are massive. Businesses investing in buildings, equipment or a warehouse full of merchandise could have to spend thousands of dollars more.
Those who end up having to pay more will either have to lose that off their bottom line, or pass that on to consumers and clients. The economic effect will ripple across the province, she said.
On the positive side, she said, is the modernization and general overhaul of laws the government can achieve with the new legislation the PST switch will require. On the other hand, she said, the PST is a more burdensome and inefficient form of taxation for the overall economy and especially for the business owners who have to operate a point-of-sale tax system.
"Across Canada, the changes in consumer tax law are going towards the HST style," she said. "By 2013, Saskatchewan, Manitoba and now B.C. are the only provinces who won't have some form of HST, and the other two might consider it the better option by then."
She said the accounting community was so surprised by the public's referendum choice o return to the PST that she personally "almost dropped my baby when I heard the news" and now the provincial government is bound to it. "Only one other place in the world - a country in Africa with a name I can't pronounce - has brought back a PST. And now BC. It is an archaic system, and this is taking steps backwards. It is not something business welcomes."
The province also lost a considerable number of tax auditors when the old PST was shed for the HST, and an unaccounted byproduct of switching back to the PST is lost experience in the auditor ranks.
"It's generally not a good thing for you [in business] to have a bunch of new tax auditors with little experience," Chang warned.
A great deal of the coming PST rules and regulations are not yet known, as the provincial government rewrites these documents and tries to factor in the $1.6 billion HST signing gift that BC must now pay back to Ottawa out of general coffers. Chang urged business owners and managers to stay abreast of the interim announcements from government, and stay in close contact with their accountants, so important business decisions could be made with the least amount of cost and inconvenience to their firm.
