Beginning in 2010, British Columbia will join other Canadian provinces that have discontinued its own individual Provincial Sales Taxes and instead harmonized with the Canadian Goods and Services Tax.

On July 23, 2009, B.C. Premier Gordon Campbell released a statement describing plans to adopt Harmonized Sales Tax on July 1, 2010. Under the plan, B.C.’s existing 7 percent PST will be combined with the current GST of 5 percent, creating a single 12 percent Harmonized Sales Tax (HST). The 12 percent rate will be the lowest harmonized tax rate in Canada.

HST has already been adopted in Nova Scotia, New Brunswick, and Newfoundland and Labrador. In addition, Ontario plans to implement HST the same day B.C.’s new rate goes into effect. Under the 12 percent HST, 7 percent of the revenue is allocated to the provincial government while 5 percent is allocated to the federal government.

Harmonizing the federal and provincial sales taxes saves the government money by streamlining tax collection. A single tax is collected instead of two. In addition, unlike PST, HST is a value added tax, meaning businesses can reclaim HST paid on commercial activities by deducting the HST paid on supplies from the amount received from sales and remitted to the government.

Before harmonizing, businesses could only reclaim GST, but not PST. The B.C. government estimates harmonizing will save business $1.9 billion per year. However, many goods and services that were exempt under B.C. PST will be taxable once the HST is in effect, such as food, medicine, and household repairs.