Blog: HST Changes for 2016 plus the Québec Court of Appeal’s response to Revenu Québec (Groupe Enico Inc. v. Revenu Québec)

March 2nd, 2016 CTI en Ontario

HST changes for 2016

The HST, where applicable, is comprised of the 5% GST and a provincial component that is determined by each participating province independently.

Newfoundland and Labrador – January 1, 2016 HST increase cancelled

The HST increase that had been scheduled for January 1, 2016 has now been cancelled. The provincial component of the NFL HST was left unchanged at 8%, for a combined HST rate of 13%.

New Brunswick – HST increased to 15% starting July 1, 2016

The New Brunswick 2016-2017 budget announced, effective July 1, 2016, an HST increase of two percentage points. This will bring the New Brunswick HST rate from 13% up to 15%, on par with the sales tax rate applicable in Nova Scotia and Québec, its two neighboring provinces. This announcement further confirms the status of New Brunswick as the province with the highest effective income tax and sales tax rates in Canada.

Transitional rules have not yet been made available. In any event, businesses that are not entitled to claim full input tax credits to offset the HST paid may be well advised to consider accelerating capital purchases to mitigate the impact of the upcoming sales tax increase.

Groupe Enico Inc. v. Revenu Québec –the saga continues

Groupe Enico had been audited by Revenu Québec for GST/QST and income tax purposes during the years 2003 to 2006. In the course of the audit, numerous mistakes were made by Revenu Québec, some of which were blatant violations of the taxpayer’s rights, leading to excessive amounts being reassessed. In 2013, Revenu Québec was recognized by the Superior Court of Québec to have caused the bankruptcy of Groupe Enico Inc. because of its relentlessness and abuse of procedures against the taxpayer.

Pursuant to Revenu Québec’s appeal of this decision, the Québec Court of Appeal released its decision on January 25, 2016. Revenu Québec is to pay approximately $3 million to Groupe Enico, including $1 million in exemplary and punitive damages. This is $1 million less than what had been originally awarded by the Superior Court. However, the decision still sends a strong message, and should prompt Revenu Québec to promptly implement the changes to its internal policies announced in its 2016 Action Plan.

Revenu Québec has not yet exhausted its recourses. It may decide to further appeal to the Supreme Court of Canada.

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