BC Minister of Finance Responds to Industry Concerns about PST Changes

Early in March, HRAI sent a letter to BC Minister of Finance Selina Robinson regarding provincial sales tax (PST) changes to home heating equipment in the province, specifically an increase from 7% to 12% on fuel-burning equipment and a reduction to 0% on residential heat pumps.  The tax changes are intended to incentivize switching a building from a fossil fuel heating system to a heat pump, with a goal of reducing greenhouse gas emissions.

HRAI’s comments did not challenge the province’s right to use tax incentives to influence the market, but rather expressed concern about: i) the lack of consultation with industry prior to the announcement of these tax changes; and ii) the very short implementation date of April 1, 2022, which made it difficult for businesses to adjust their systems in time.

On May 18, HRAI received a response from Minister Robinson explaining the government’s decisions on this matter.   On the question of advance consultation, she stated that “the Ministry of Finance is not always in a position to consult with industry prior to tax changes in situations where such consultation could shift economic behavior in anticipation of an impending change or provide an advantage to those who were consulted.”

She also indicated that Ministry of Finance staff did consult internally with experts at the Ministry of Energy, Mines and Low Carbon Innovation and found that the tax changes “are aligned with the CleanBC plan” (which was subject to industry consultation).  It is worth noting however, that there is no mention of tax measures in any of the mandate letters provided to the Ministers concerned nor in any recent consultations on the CleanBC plan.

On the question of the April 1, 2022 implementation date, the Minister responded that the implementation date was chosen “to minimize economic distortions from people delaying heat pump purchases and, conversely, increasing fossil fuel heating equipment sales before the rate increase,” and added that “this is common practice for tax measures, as a balance must be struck between providing preparation time for business, while also minimizing these potential distortions.

HRAI will continue to engage with the BC government on this matter with a message underlining the importance of working in partnership with industry.

The BC Ministry of Finance has posted a notice with information on the tax changes, which can be found online at: https://www2.gov.bc.ca/assets/gov/taxes/sales-taxes/publications/notice-2022-003-provincial-sales-tax-on-fossil-fuel-combustion-systems-and-heat-pumps.pdf.

If members have additional questions beyond what is addressed in this notice, they are welcome to contact the Ministry by phone at 1-877-388-4440 or by email at CTBTaxQuestions@gov.bc.ca

For more information members can also contact Martin Luymes at 1-800-267-2231 ext. 235 or email mluymes@hrai.ca or Victoria Cross at (778) 808-8674 or email victoria@twowestgroup.com

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