1995 BUDGET REPORTS
C1: Summary of Revenue Measures
Effective Date 1995/96 Full Year
Home Owner Grant Act ($ millions)
o Threshold for home owner grant phase-out
increased to $475,000 from $450,000.............. 1995 tax year (5) (5)
o School property tax rates for residential and
some non-residential properties reduced in
response to increases in assessed values.
Rate adjustments will result in average
gross school taxes equal to 1994 levels ......... 1995 tax year -- --
Taxation (Rural Area) Act
o Some general purpose rural area property tax
rates reduced in response to increases in
assessed values. Rate adjustments will result
in average gross taxes equal to 1994 levels...... 1995 tax year -- --
Social Service Tax Act
o List of items that can be purchased tax March 29 and
exempt by bona fide farmers expanded............. June 1, 1995 (3) (3)
o Various fees and licences adjusted............... various 3 10
Total....................................... (5) 2
Grants in Lieu of Property Taxes
- Government will distribute about $2 million in grants to local governments for colleges and universities and negotiate with the Union of British Columbia Municipalities regarding grants for BC Rail.
Railway Property Taxation
- Recommendations will be developed to improve the fairness and competitiveness of railway property taxation.
Assessment of Intermittent Industrial Operations
- Task force to recommend ways to reduce the influence of the property tax system on closure of intermittent operations such as mines.
Revenue Measures: Supplementary Information
HOME OWNER GRANT ACT
Effective for the 1995 taxation year, the home owner grant phase-out threshold is increased to $475,000 from $450,000. This change is in response to increases in assessed values of residential properties. The grant will be phased out at the rate of $10 of grant for each $1,000 of assessed value in excess of $475,000. As a result, the grant will be eliminated for most homeowners with a home assessed at more than $522,000. For homeowners who are seniors, handicapped or recipients of war veterans allowances, the grant will be eliminated for homes assessed in excess of $549,500. Setting the threshold at $475,000 means that, as was the case in 1994, roughly 95 per cent of homeowners will not be affected by the phase-out.
School property tax rates for residential and some non-residential property classes will be reduced in response to increased assessed values. The rates for the 1995 tax year will be adjusted so that average gross school property taxes for residential and non-residential properties will be the same as 1994 levels.
Even with the freeze on average tax levels, there will be some changes to individual tax bills. For example, a family whose home had a below-average assessed value increase will likely see the school levy for its home drop. Correspondingly, the school levy will likely rise for a family whose home has increased in value by more than the average. Similar shifts will occur within the non-residential property classes. Rates will be set in April 1995.
TAXATION (RURAL AREA) ACT
The general purpose rural area property tax rates will be adjusted to compensate for higher assessed values in 1995. The rate changes will ensure that average rural area taxes levied by the province will be the same as in 1994. Because individual property value changes deviate from the average, some property owners will experience an increase in their rural area levy, while others will experience a reduction. Rates will be set in April 1995.
SOCIAL SERVICE TAX ACT
ADDITIONAL EXEMPTIONS FOR BONA FIDE FARMERS
The following are added to the list of items that can be purchased exempt from the provincial sales tax by bona fide farmers for farm purposes.
Effective March 29, 1995:
Electricity, natural gas, fuel oil and propane used by bona fide farmers for farm purposes, other than in internal combustion engines or to propel motor vehicles, are exempt from the provincial sales tax effective June 1, 1995.
- artificial lighting systems used in greenhouse operations to extend the growing season;
- thermal curtains used in greenhouse operations to retain heat; and
- crop protection netting systems that protect crops from predators.
A number of changes to fees and licences will be introduced during the fiscal year. These changes help cover the government's additional cost of providing existing or new services. Changes to fees and licences include:
The following fee and licence measures will be introduced by government, but revenue generated will not flow into the consolidated revenue fund:
- increasing angling licence fees -- additional revenue will be dedicated to the Habitat Conservation Fund;
- increasing vital statistics fees;
- increasing mine health and safety inspection fees;
- increasing safety fees for electrical and gas installations, elevators and boilers;
- introducing and increasing fees for archive and records services, and for statistical publications;
- increasing the fee for providing written confirmation of rural area property tax account information (the fee for electronic access to the information is not affected);
- increasing certain manufactured home registry fees; and
- increasing fees for motor vehicle licences, drivers' licences and other motor-vehicle-related services.
- at the request of the Insurance Council of British Columbia, the fee for transferring, amending or reinstating licences for insurance agents, salespeople and adjusters will be increased. Revenue from the fee increase will be retained by the Insurance Council to help offset its costs; and
- a contribution fee will be introduced for deposit into the Motor Dealer Customer Compensation Fund -- a trust fund administered by a board comprised of representatives from industry and consumer groups. The fund will be used to compensate customers for eligible losses resulting from a motor dealer's actions, including declarations of bankruptcy or insolvency.
GRANTS IN LIEU OF PROPERTY TAX
For the 1995 property tax year, the government will provide about $2 million in grants in lieu of property taxes to local governments where universities or colleges are located. The Union of British Columbia Municipalities (UBCM) will be consulted on how best to distribute these grants. A separate grant scheme will apply to the Royal Roads campus in 1995.
During 1995 the government will work with the UBCM and communities on the BC Rail line to develop proposals for the payment of grants in lieu of property taxes by BC Rail that are fair to these communities, while recognizing the fiscal constraints facing the provincial government and BC Rail.
The overall review of the payment of grants in lieu of property taxes by Crown entities will continue, with emphasis on grants paid by B.C. Hydro and BC Ferries.
RAILWAY PROPERTY TAXATION
The government recognizes that a competitive railway infrastructure is essential to the economic well-being of the province and, in particular, the province's seaports. In 1995, the government will review the report expected from the Railway-Municipal Liaison Committee on Property Tax and Assessment. The government will work with the railways and municipalities to develop specific options to create a property taxation system that is fair to railways and to communities and that will help ensure a competitive rail transportation system. If appropriate, changes will be introduced for the 1996 taxation year.
ASSESSMENT OF INTERMITTENT INDUSTRIAL OPERATIONS FOR PROPERTY TAX PURPOSES
Existing regulations, which determine the assessed value of industrial operations that operate intermittently in response to fluctuating resource prices, can have the effect of initiating premature shutdowns of these operations. Premature shutdowns have negative economic effects on employees, owners, service industries and governments. The provincial government will institute a task force to investigate methods of reducing property tax considerations from closure decisions, while maintaining revenue predictability in the property tax system.
C2: Summary of Administrative Measures
Income Tax Act
o Deduction permitted for contributions into mine reclamation
trusts and taxation of income earned in the trust............ February 22, 1994
Corporation Capital Tax Act
o Investment allowance expanded to include mine reclamation
trusts resident in any province.............................. February 22, 1994
Social Service Tax Act
o Period during which proportional tax refund is available
to purchasers who return motor vehicles to vendors extended
to one year.................................................. March 29, 1995
o Refund provided for bona fide farmers who purchase
otherwise exempt farm equipment prior to obtaining
farm land classification..................................... March 29, 1995
o List of exempt safety equipment expanded..................... March 29, 1995
o Eight-month holding period for intercorporate relief on
windups removed where corporations have been related for
at least eight months........................................ March 29, 1995
o Fifty per cent refund for eligible mineral exploration
equipment increased to 100 per cent and list of eligible
equipment expanded........................................... March 29, 1995
o Application of tax to computer software clarified............ March 29, 1995
Motor Fuel Tax Act
o International Fuel Tax Agreement announced................... January 1, 1996
Property Transfer Tax Act
o First-time home buyers exempted from certain eligibility
requirements where death or divorce occurs in the first year March 29, 1995
o Provincial Capital Commission exempted on transfers of
land for park purposes....................................... March 29, 1995
o Transfers of principal residences from trustees in bankruptcy
to spouses or former spouses of bankrupts exempted........... March 29, 1995
o Clarify that grants in lieu of school taxes paid to a
municipality must be transferred to the province............. 1995 tax year
Administrative Measures: Supplementary Information
INCOME TAX ACT
DEDUCTION PERMITTED FOR CONTRIBUTIONS INTO MINE RECLAMATION TRUSTS
Effective for taxation years ending after February 22, 1994, contributions made into mine reclamation trusts will be deductible for corporation income tax purposes. Earnings in the trust will be taxed on an annual basis at the corporate rate in effect and a refundable credit will be provided to beneficiaries of the trust. This change, which was announced in a press release dated August 31, 1994, parallels the federal income tax legislation.
CORPORATION CAPITAL TAX ACT
INVESTMENT ALLOWANCE EXPANDED
Effective February 22, 1994, mine reclamation trusts established in any province will qualify as eligible investments for purposes of the investment allowance deduction.
SOCIAL SERVICE TAX ACT
PROPORTIONAL REFUND PERIOD EXTENDED FOR MOTOR VEHICLES
Effective March 29, 1995, the period during which a proportional refund of tax may be obtained on the return of a motor vehicle is extended from 90 days to one year. For example, where a motor vehicle dealer refunds $10,000 to a purchaser on the return of a motor vehicle purchased for $12,000 within the previous year, the purchaser is eligible for a refund of provincial sales tax paid on the refunded amount -- in this case, 7 per cent of $10,000, or $700. The 90-day period remains applicable for proportional refunds on all other taxable goods.
REFUND PROVIDED FOR BONA FIDE FARMERS WHO PURCHASE OTHERWISE TAX EXEMPT FARM EQUIPMENT PRIOR TO OBTAINING FARM LAND CLASSIFICATION
Effective March 29, 1995, a refund of tax is provided for farmers who pay tax on otherwise exempt farm equipment used solely for farm purposes, or taxable services related to that equipment, during the two-year period prior to obtaining farm land classification.
LIST OF EXEMPT SAFETY EQUIPMENT EXPANDED
Effective March 29, 1995, the following are added to the list of items which can be purchased exempt from the tax as safety equipment:
- flares purchased for use on vessels to draw attention to the vessel when in distress; and
- gas detection monitors for commercial, residential and industrial use.
EIGHT-MONTH REQUIREMENT REMOVED FOR INTERCORPORATE RELIEF ON WINDUPS
Currently, corporations are required to remain related for an eight-month period following a transfer of assets to qualify for the exemption for transfers between related corporations. Effective March 29, 1995, this requirement is removed for windups where the corporations have been related for at least eight months.
FIFTY PER CENT REFUND FOR ELIGIBLE MINERAL EXPLORATION EQUIPMENT INCREASED TO 100 PER CENT
A 50 per cent refund of provincial sales tax is currently provided for purchases of certain equipment used for mineral exploration in British Columbia. To qualify, the equipment must be purchased and used for at least 12 months to drill, excavate, or directly receive excavated material during the search for mineral ore. Effective March 29, 1995, the 50 per cent refund is increased to 100 per cent and the list of eligible equipment is expanded to include backhoes, if used solely for trenching, and rock saws.
APPLICATION OF THE TAX TO COMPUTER SOFTWARE CLARIFIED
Effective March 29, 1995, the definition of computer software is replaced by a new definition of software to clarify the application of the tax. Software, which remains subject to the tax, is defined to include packaged or pre-written software programs and modifications to those programs.
Excluded from the definition of software, and therefore not subject to the tax, are:
Software that is not taxable on initial purchase because it qualifies as custom software or software that has been significantly modified is taxable if copies are subsequently sold or leased to other purchasers.
- packaged or pre-written software programs that are modified for a specific purchaser to the point where the purchase price of the modified software is more than double the purchase price of the unmodified software; and
- custom software which is designed and developed solely to meet the requirements of a specific purchaser.
MOTOR FUEL TAX ACT
INTERNATIONAL FUEL TAX AGREEMENT
British Columbia intends to join the International Fuel Tax Agreement (IFTA), effective January 1, 1996, to reduce administrative requirements for the trucking industry. IFTA is a multi-jurisdictional agreement establishing a single uniform system for administering and collecting fuel taxes from interjurisdictional carriers.
PROPERTY TRANSFER TAX ACT
FIRST-TIME HOME BUYERS EXEMPTED FROM CERTAIN ELIGIBILITY REQUIREMENTS WHERE DEATH OR DIVORCE OCCURS IN THE FIRST YEAR
Two of the eligibility requirements for the first-time home buyers' exemption are that first-time buyers:
Where a first-time buyer fails to meet either of these requirements, the exemption is nullified and tax is payable.
- reside on the property for one year following the date of purchase; and
- not pay down the required registered financing by more than a certain amount in the first year.
Under the existing legislation, the death or divorce of a first-time buyer in the first year after purchase may contravene these requirements.
Effective March 29, 1995, first-time buyers are not disqualified from receiving the exemption as a result of death, or divorce evidenced by a written separation agreement or court order, in the first year after purchasing a home. First-time buyers or their estates who have had their exemption nullified for these reasons, and have paid the tax, may apply for a refund before April 1, 1996.
PROVINCIAL CAPITAL COMMISSION EXEMPTED FROM TAX ON TRANSFERS OF LAND FOR PARK PURPOSES
Effective March 29, 1995, the Provincial Capital Commission is exempted from tax on the transfer of land to be used solely for park purposes.
EXEMPTION PROVIDED FOR TRANSFERS OF PRINCIPAL RESIDENCES FROM TRUSTEES IN BANKRUPTCY TO SPOUSES OR FORMER SPOUSES OF BANKRUPTS
An exemption is currently provided for the transfer of property to a trustee in bankruptcy, and from the trustee back to the bankrupt, provided the trustee receives no consideration for the transfer back to the bankrupt. However, where a bankrupt's principal residence is transferred from a trustee in bankruptcy back to the spouse or former spouse of the bankrupt, the exemption does not apply. Effective March 29, 1995, an exemption is provided for transfers of principal residences from trustees in bankruptcy to spouses or former spouses of bankrupts, provided no consideration is paid for the transfer. Individuals who have paid the tax in these situations may apply for a refund before April 1, 1996.
CLARIFY THAT GRANTS IN LIEU OF SCHOOL TAXES PAID TO A MUNICIPALITY MUST BE TRANSFERRED TO THE PROVINCE
The School Act currently requires that grants in lieu of school taxes paid to a municipality under the Municipal Grants Act (Canada) or the Municipal Aid Act must be transferred to the province on or before February 1 of the following year. The School Act will be amended to clarify that all grants paid in lieu of school taxes must be transferred to the province.
Budget '95 (Province of B.C.)
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