WHEREAS UBCM members stated in 2001 that the provincial and federal governments should consider using GST and PST revenues to promote energy conservation and alternative energy sources; AND WHEREAS neither the provincial nor the federal governments have developed energy conservation or alternative energy generation programs funded from energy sales tax revenues: THEREFORE BE IT RESOLVED that the Union of BC Municipalities lobby the provincial and federal governments to implement a full sales tax refund policy for machinery and equipment for municipal energy conservation andor alternative energy generation projects.
MINISTRY OF FINANCE Local governments have a number of tax advantages compared to private sector suppliers and this can lead to concerns about fairness when local governments undertake commercial activities. For this reason local governments were excluded from the provincial sales tax exemption for production machinery and equipment, an exclusion shared by other jurisdictions such as Ontario that provide similar exemptions. Local governments generally have the ability to structure their projects, including power generation projects, to qualify for the exemption, although this may require forgoing other tax advantages.
MINISTRY OF FINANCE With respect to resolution B10 entitled Tax Refund for Municipal Energy Projects ConservationAlternative Generation, I would like to first point out that I am not in a position to speak to the issue of the provincial sales tax. I welcome, however, the opportunity to comment on the application of the goods and services taxharmonized sales tax GSTHST to machinery and equipment used in energy conservation andor alternative energy generation projects. As you may know, the GSTHST is a broad based, value added tax on consumption in Canada. Under the GSTHST, the value added at each stage of the production-distribution process is taxed, rather than only at the point of final delivery of goods and services, as it is the case under a retail sales tax. In accordance with this structure, all purchasers other than certain provincial governments, which exercise their constitutional immunity pay the tax. The net tax that is actually borne by the purchaser depends on the taxable or exempt nature of the supplies and on the status of the purchaser for instance a business or a public service body. Therefore, the GSTHST treatment of municipal energy conservation andor alternative energy generation projects depends on whether the project is part of the municipalitys commercial or exempt activities. If the energy is sold commercially, the municipality must collect and remit the tax on its sales and is generally entitled to claim a full refund of the tax it paid on its purchases to make this taxable sale in the form of an input tax credit. On the other hand, the GST or the federal portion of the HST paid in respect of energy projects that are part of a municipalitys exempt activities qualify for a full rebate as of February 1, 2004. Therefore, in the end, the GST or the federal portion of the HST paid by municipalities with respect to machinery and equipment used in energy conservation andor alternative energy generation projects should be, in any case, fully refundable.
FCM RESPONSE At its 2005 Annual Convention, the FCM deferred this resolution to the September 2005 meeting of the National Board of Directors.