Quebec Sales Tax Deal Imminent

by Robert Lee, Tax-News.com, London

30 September 2011

After 'significant progress' was made in recent talks between Quebec and the federal Canadian government, the province is expected to receive its long-awaited compensation package for the implementation of a harmonized sales tax regime.

Earlier in the month, ministers on both sides signaled their readiness to hammer out a deal before the end of September. Federal Prime Minister Stephen Harper was expected to deliver the news on September 30, along with the funds requested for compensation.

Quebec has been seeking compensation for the harmonization of its sales taxes, which it originally carried out in the 1990s. At present, the Quebec Sales Tax (QST) is charged at 8.5%, with the federal goods and services tax (GST) at 5%. The two are blended in a harmonised sales tax (HST), administered by Revenu Quebec

Canadian Finance Minister Jim Flaherty made provision in his June Budget for CAD2.2bn (USD2.1bn) in “support of the conclusion of a satisfactory agreement between Canada and Quebec on sales tax harmonization”. Compensation to the tune of CAD4.3bn was provided to Ontario when it switched to the HST, with CAD1.6bn given to British Columbia. The results of a recent referendum in British Columbia, where electors rejected the HST, mean that the provincial government there is obliged to return the funds supplied to it.

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