Let’s Turn Up the Heat on PST
by Frits Verhoeven

“ …this is one of the most discriminatory taxes we have ever seen.”

The above quote comes from the late Fred Gingell, MLA, at the time the Liberal finance critic, in response to the introduction into the House by the Finance Minister, Glen Clark, on Thursday, April 30, 1992 of amendments to the Social Services Tax Act to impose a provincial sales tax on legal services.

With the dismissal of the Christie case by the Supreme Court of Canada on May 25, 2007, the government has established that it has a constitutional right to continue to tax legal services, whether or not it is fair, just or wise to do so. For our part, the CBABC has decided to continue the campaign to fight this outrageous tax.

Is “outrageous” (admittedly, an overworked adjective) too strong a word to use? I don’t think so.

I have now made presentations three years running to the Legislative Standing Committee on Finance on the topic of abolishing the tax on legal services. I have met with several Ministers and numerous MLAs on this topic. No one in or out of government has ever mounted any rational defence of the tax. It is practically conceded that the tax is discriminatory, unfair, bad for business, and generally makes no sense whatsoever, yet the tax remains. Why is that?

The answer, of course, is that the tax brings in well over $100 million per year, with very little effort on the part of the government, and not much opposition.

In partial defence of its position, the government says that every province other than Alberta and Ontario taxes legal services. There are three things that need to be said in response to that:

1. No other province targets legal services for a special tax. Every other province that taxes professional services taxes them all equally. Above all else, this is what makes the tax so repugnant. It is as though access to justice ought to be specifically discouraged;
2. From a competitive point of view, Alberta and Ontario are the provinces that matter the most;
3. In three of the provinces that have a tax on professional services (Newfoundland, Nova Scotia, and New Brunswick), the tax is a G.S.T style harmonized sales tax, the effect of which is that business clients do not generally pay it. Quebec has a similar tax that in effect business clients do not generally pay. Therefore these provinces, too, are more competitive than B.C. for legal services to business. Saskatchewan, Manitoba and Prince Edward Island charge a traditional P.S.T. style tax, which is levied against all professional services.

The government also says that, although tax proceeds are not earmarked for legal aid, it spends a lot of money on legal aid and on the justice system generally. But why should legal fee paying clients be solely responsible for funding legal aid, and for the costs of the justice system, while the general taxpaying public pays nothing? In 1992, Fred Gingell said, “It simply isn’t logical; it is fuzzy thinking,” and he was right.

Appeals to reason have not persuaded the government to eliminate the tax. The fact is that the legal profession in British Columbia has not so far been able to bring sufficient political pressure to bear, and so our clients continue to be unfairly targeted for this tax, and the legal profession in British Columbia remains at a competitive disadvantage vis a vis other professionals both inside and outside B.C. It is time to mobilize a broad-based campaign to oppose the tax. So contact your MLA and demand to know his or her position on this. Take every opportunity to remind the government that this tax must be abolished. Write a letter to the Minister of Finance about this. Suggest that your clients do the same. Let’s see if together we can finally get rid of this tax!

This is my last BarTalk column as President. It has been a great honour to serve the 6,000 members of the CBABC as President. I am grateful for the tremendous goodwill and support I have received. I especially wish to thank my colleagues on the Executive Committee, all of our CBABC volunteers, and finally, our dedicated staff.

This article was published in the August 2007 issue of BarTalk and is subject to the copyright by the British Columbia Branch of the Canadian Bar Association, 2007, all rights reserved.