BC’s Mineral Explorers, Developers and Miners Support the HST – Find out Why

The Harmonized Sales Tax (HST) is a simpler tax with less red tape. Members of AME BC are realizing significant savings on capital expenses like equipment and materials. This spring AME BC and the Mining Suppliers Association of BC (MSABC) hired the noted economist George Macauley to undertake a detailed study of the HST’s impact on mineral exploration, developers and suppliers. His key findings are summarized here:

  • Mining explorers indicated that they did not expect that their future spending or employment in BC (or elsewhere) would be affected by the adoption of the HST in BC.
  • Mining suppliers indicated that they did not expect that their future revenues or employment in BC or revenues elsewhere would be affected by the adoption of the HST in BC.
  • Mining explorers and mining suppliers indicated that the HST would be easier to administer than the PST (presumably by reducing duplication (PST, GST) and less frequent remittance (quarterly for HST vs. Monthly for PST).

Additional Highlights:

The British Columbia government implemented the Harmonized Sales Tax (HST) on July 1, 2010.  The BC HST framework administered by the Canada Revenue Agency involves the following four key components:

  • Application of the 12% HST in place of the combined 12% effect of the 5% Goods and Services Tax (GST) and 7% Provincial Sales Tax (PST) on a range of consumer items already attracting the PST.
  • Application of the 12% HST in place of the 5% GST on a number of consumer items that did not previously attract the 7% PST.
  • Implementation of an HST input tax credit system (like the GST) to allow businesses to receive credit for HST paid on inputs to their business processes.
  • Quarterly BC HST credits for British Columbians with low and modest incomes and an increase in the income tax basic personal amount.

Click here for more in-depth findings.

Impact on Mineral Explorers and Mining Suppliers

Mining explorers and mining suppliers were surveyed to canvass their views of the potential impact of the HST on their businesses. 

  • Mining explorers indicated that they did not expect that their future spending or employment in BC (or elsewhere) would be affected by the adoption of the HST in BC.
  • Mining suppliers indicated that they did not expect that their future revenues or employment in BC or revenues elsewhere would be affected by the adoption of the HST in BC.
  • Mining explorers and mining suppliers indicated that the HST would be easier to administer than the PST (presumably by reducing duplication (PST, GST) and less frequent remittance (quarterly for HST vs. Monthly for PST)).
  • While mining suppliers viewed the HST as fairer than the PST and reducing distortions (embedded PST in input costs), mineral explorers were less favourable.

While these results suggest that respondents view the impact of the HST as at least modestly positive, there is not generally a resounding endorsement reflecting the strong positive results of increased competitiveness, investment and employment (Mintz 2010). There are good reasons to expect the impressions of the survey respondents to not match the Mintz (2010) findings.

  • The survey respondents are small in number (not statistically significant).
  • Individual respondents likely focus on their specific situations (micro).  For some explorers the initial increase of some input prices (like HST on contracted labour services) may create budgetary constraints even though the HST is subsequently returned through the HST input tax credit system.
  • For many individual mineral explorers, the benefits of the HST input tax credits may be appreciated but not viewed as sufficient to lead to changes in behaviour.
  • Mineral exploration and mining supply are driven primarily by key factors including commodity prices, individual property opportunities, commodity supply/demand balances and exploration and development budgets rather than the consumption tax regime in BC.  Individual respondents apparently focus on those key factors and do not recognize the HST as significant.
  • Mintz (2010) reviews elements of relative competitiveness between businesses in a range of jurisdictions over an extended period of time for a range of industry participants (macro).
  • While not identified by individual survey respondents, the HST is one component of a broader fiscal package considered by existing businesses, potential entrants and potential migrating businesses in making decisions that may induce additional economic activity in BC.

Since the early drafts of this paper were delivered to AME BC and MSABC in early May 2011, there have been two key developments in relation to consideration of the HST in British Columbia:

  1. The report of the Independent Panel appointed by the BC government, and
  2. Amendments proposed by the BC government to address its understanding of concerns of British Columbians.

Click here for more details.

Last year, following an inquiry to AME BC members and after consultation with accountants and economists familiar with mineral exploration and development, AME BC endorsed the HST. Read more at www.amebc.ca/documents/Policy/taxation/HST.pdf.