HST should come with a fairness code

One of the first small-business issues that I got involved in had to do with a nasty provincial sales tax (PST) audit.

A fabric-store owner phoned our office on the verge of tears and told us that a tax auditor had just handed her a bill for $93,000. She would either lose her house or her business.

She had been following the advice on the government-issued PST bulletin that said that any fabric suitable for clothing was PST exempt.

The auditor informed her that, because some of her customers were using the fabric to make quilts, she owed $93,000.

The business owner was following the bulletin in the way anyone would -- it said nothing about charging tax for customers making quilts.

After more than a year of intense back and forth, the provincial revenue ministry made the sensible decision to withdraw the charges.

With cases like this crossing my desk, you might think I would be jumping for joy at the thought of eliminating the PST. Knowing one set of rules instead of two reduces the risks of inadvertently making a costly tax mistake.

But I'm worried because Ottawa is a lot less responsive than Victoria.

The silver lining to the fabric-store case was it led to some groundbreaking changes around PST administration. I worked closely with then-minister of provincial revenue Rick Thorpe, and his staff to create a Taxpayer Fairness and Service Code that goes beyond platitudes and contains some meaningful protection for business.

Nothing even close exists at the federal level.

The code contains three important rights.

First, you can get any tax advice in writing.

Second -- and this is the biggie -- the advice will be respected even if it is wrong. This would have saved our fabric-store member a year of anxiety as we worked to resolve her case.

Finally, if there is a disagreement about written advice, an outside expert from the same industry will be consulted for input.

In other words, PST staff doesn't get to be both judge and jury.

This probably sounds like common sense. After all, businesses are required to collect sales tax on behalf of governments as it would be too costly for governments to try to collect it themselves.

Punishing business owners for government errors or unclear bulletins is ludicrous. But the B.C. Taxpayer Fairness and Service Code is groundbreaking stuff when it comes to tax administration in Canada.

The B.C. government and bureaucrats deserve a lot of credit for introducing and embracing the code. The culture change within government that it facilitated is truly remarkable.

Cases like the fabric store have gone from a regular occurrence to a rarity. When I do get a serious PST complaint, it is usually easily resolved.

What happens to the B.C. Taxpayer Fairness and Service Code and its protections for business when the HST is introduced?

It's lost unless we can convince Ottawa to adopt it and federal staff to embrace it.

What are our odds? Most would say it's a long shot.

My opinion? Don't bet against small business. The principles of fairness are on our side and we just might prevail.

Laura Jones is vice-president of Western Canada for the Canadian Federation of Independent Business. She can be reached at laura.jones@cfib.ca.

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