QST Harmonization: How It Will Impact Your Business - Take 2

Author:Mr Jean-Guillaume Shooner
Profession:Stikeman Elliott LLP

Almost nine months ago, Prime Minister Stephen Harper and Premier Jean Charest announced the conclusion of a memorandum of agreement ("MOA") relating to the harmonization of the QST with the federal GST. The MOA was intended to form the basis for a final agreement between the two levels of government on the harmonization of the two taxes. This past April 18th, the Quebec Minister of Finance, Raymond Bachand, announced that the agreement, called the Canada-Quebec Comprehensive Integrated Tax Coordination Agreement (the "Agreement") has now been concluded. The Agreement essentially addresses two elements: 1) harmonization of the tax base and rules and 2) the payment to Quebec of a total of $2.2 billion to compensate the province for implementing the harmonization measures. Although the $2.2 billion compensation amount envisaged by the MOA has remained unchanged in the Agreement, it could be reduced and might even have to be repaid if Quebec fails to fulfill or violates the terms of the Agreement. The Agreement has now eliminated some of the inconsistencies between the Quebec and federal systems, which had "displeased" the federal government. We would note, however, that Quebec has retained its separate legislation and that it will not, therefore, become an HST "participating province" as is the case, in particular , for Ontario or British Columbia. With one exception, the Agreement contemplates that Quebec will also retain its administrative responsibility for both the GST/HST and the QST within the province. As a result, taxpayers (even those established outside Quebec) registered for the QST will still have to prepare separate QST returns and...

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