Premier Gordon Campbell signed a trade agreement on April 30 that ensures Saskatchewan and Alberta companies don't need to set up offices in B.C. to carry on business activities.
The New West Partnership Trade Agreement takes effect on July 1, which is the same day that B.C.'s harmonized sales tax will start being collected.
Alberta does not have a provincial sales tax, which means companies there only need to charge the five-percent GST. Saskatchewan has a five-percent provincial sales tax, and has not signed onto the HST.
In B.C., the new 12-percent HST will combine the GST with a seven-percent provincial sales tax, which will be extended to many new areas already covered by the GST. This translates into a new seven-percent charge on such purchases as tickets, bicycles, club memberships, home renovations, and many professional services. Companies will be allowed to reclaim business inputs, which will result in a $1.9-billion tax shift from business to consumers.
In a previous interview with the Georgia Straight, anti-HST campaigner Bill Vander Zalm, a former premier, has claimed that Alberta companies would be able profit from B.C.'s HST at the expense of B.C. companies.
He maintained that this could be done by selling services, such as home renovation, in B.C. through an Alberta office and not charging HST.
Under article 11, which deals with investment, the New West Partnership Trade Agreement states: "A requirement by a Party that an enterprise has an agent located within its territory for service of notices of proceedings or other judicial documents is deemed not to be a requirement to establish or maintain a local presence or to be resident in its territory. Parties shall further consider options for eliminating measures requiring the designation or maintenance of agents for service."
The New West Partnership Trade Agreement is one of four agreements signed by the three provinces on April 30. It is silent on the HST.
The trade agreement grants exceptions to the signatories in many areas, including taxation.
The deal stipulates that nothing will prevent a party from establishing a monopoly. This means that B.C. won't be required to allow private-sector competition for ICBC's basic vehicle insurance.
The agreement also provides exemptions for aboriginal peoples, water, social policy, and labour standards.
The latter exemption means that B.C. can continue to offer the lowest minimum wage in the country and that Alberta can still allow for the use of replacement workers in labour disputes.
The three provinces will offer open and nondiscriminatory procurement for "departments, ministries, agencies, boards, councils, committees, commissions and similar agencies" where the procurement value is $10,000 or greater for goods, $75,000 or greater for services, and $100,000 or greater for construction.
For Crown corporations and other government-owned commercial enterprises, this will be $25,000 or greater for goods, and $100,000 or greater for services and construction.
In addition, the agreement states that there will be open and nondiscriminatory procurement for local and regional governments. Here, it will apply to $75,000 or greater for goods and services, and $200,000 or greater for construction.
The three provinces agreed to "reconcile their business registration and reporting requirements so that an enterprise meeting such requirements of one Party shall be deemed to have met those of all other Parties".
In addition, the agreement states that the provinces and municipal governments "shall consider options to provide for the reconciliation" of municipal business licences, but this won't occur until after provincial reporting requirements are addressed.
Three-member dispute-resolution panels will be created to issue legally binding orders in response to any complaints. These panels will be allowed to offer financial awards up to $5 million.
Similar to the North American Free Trade Agreement, companies can file complaints and have access to the dispute-resolution system.
The World Trade Organization, on the other hand, requires complaints about unfair trade practices to be filed by governments, which means that individual companies don't have direct access to the arbitration system.
Any ruling by a dispute-resolution panel under the New West Partnership Trade Agreement will be subject to judicial review.
Each province can withdraw from the agreement by giving 12 months written notice.
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