In his pre-election budget Tuesday, Finance Minister Mike de Jong announced a plan to cut the provincial sales tax on business electricity bills in half effective Oct. 1, as part of the 2017 budget.
Effective Oct. 1, the PST on electricity will be reduced from 7 per cent to 3.5. On April 1, 2019, electricity will be fully exempt from the PST.
According to Len Posyniak, senior vice president, human resources and corporate services for Catalyst Paper Corp., the elimination of the PST on electricity is a welcome and strong step forward to protect and support jobs in British Columbia’s pulp and paper sector.
“This is good news at a critical time for our industry and for Catalyst and the workers and communities who depend on our operations,” said Posyniak. “This tax change will help improve our global competitiveness and create better hosting conditions for re-investment in British Columbia.”
Electricity is a significant input cost for pulp and paper mills, accounting for more than 30 per cent of a mill’s production costs. In 2015, Catalyst paid more than $138 million in electricity, plus an additional $9.6 million in PST.
The tax policy change was recommended by the BC Commission on Tax Competitiveness.
In January, mayors of North Cowichan, Quesnel, Vernon, Port Alberni, Mackenzie, Powell River, Taylor and Port Alice wrote to de Jong asking for the measure to assist struggling sawmills and pulp mills. Port Alberni mayor Mike Ruttan was one of the eight mayors.
“I think for us as a city it’s good news. It helps maintain a really important industrial activity,” Ruttan said. “Catalyst has a huge workforce and the amount of money they spend each year just on wages is incredible. For them to be in a position where their business is at risk when there is essentially an unfair tax compared to the rest of the country just doesn’t make sense.”
Although Ruttan said he is pleased the province has chosen to cut PST, he would have preferred it to happen all at once.
“Regardless, they’re phasing it in over two years so that’s a decision they have to make in terms of how they manage their finances,” Ruttan said. “It’s still good news because it helps our industrial users in town and whether we’re talking Franklin Forest Products or Catalyst, it helps them and it positively impacts their bottom line.”