CBABC submission sparks call to look at removal of the tax

On October 21, 2005, CBABC Vice President Frits Verhoeven presented the CBA’s submission to the provincial government’s Standing Committee on Finance and Government Services at its 2006 budget consultation in Vancouver. This was the CBA’s third submission and followed two years of concentrated advocacy efforts aimed at MLAs and business groups to build support for the elimination of the tax on legal services.

This year, the CBA’s issue and submission were highlighted in the Committee’s report. Specifically, the report included the following excerpt:

“The tax on legal fees is incompatible with the government’s goal of creating a competitive business environment in B.C. The tax inflates the cost of doing business in British Columbia, relative to other jurisdictions where no such tax is imposed, notably Alberta and Ontario. We recommend that the provincial government eliminates the seven percent social service tax on legal services – the only professional services in B.C. subject to the sales tax.” (Canadian Bar Association, British Columbia Branch).

In its report, the Committee formally recommended that the government examine the removal of the tax on legal services. This is consistent with growing agreement among MLAs on both sides of the House that the tax is discriminatory and an impediment to business competitiveness and public access to justice.

The case against the SST on legal services has been bolstered by two recent court decisions that have sent a clear message to government: the tax is an impediment to justice and unconstitutional as it applies to people with low incomes. While the tax was introduced under the guise of funding legal aid, it has always gone to General Revenue.

“Collecting a tax on people and businesses that need legal services makes no sense, except as an arbitrary money generator.” said Mr. Verhoeven. “You don’t pay the tax when you access any other profession’s services in B.C., and you don’t pay the tax in a law office in Alberta or Ontario, B.C.’s main competitors for legal business.”

The B.C. Business Council has agreed, stating that the tax on legal services is a business input cost that should be removed. CBABC President Meg Shaw, who also Chairs the CBA’s SST Task Force, notes that the negative impact of the tax is particularly relevant in industries with high use of legal services including the high technology, biotech, film and resource industries. “This arbitrary tax takes money out of the economy, from the pockets of businesses and individuals who already pay corporate and personal income taxes; it’s time to get rid of it.”

For more information about the CBA’s advocacy campaign to remove the tax on legal services, visit www.cba.org/bc.

This article was published in the December 2005 issue of BarTalk and is subject to the copyright by the British Columbia Branch of the Canadian Bar Association, 2005, all rights reserved.