Canwest News Service

The Harmonized Sales Tax is coming, and many B.C. businesses are not ready for the change.

With the recent passing of the HST bill through the federal House of Commons, B.C. businesses need to start planning– yesterday — for changes the new tax regime will bring to their operations.

It takes months for a large company to gear up for a sweeping change in tax structure. The HST takes effect in B.C. this coming July, so companies should feel a sense of urgency to avoid being blindsided.

The good news is that most businesses stand to gain considerably from the harmonized tax. Although a recent Ipsos-Reid Poll For Canwest News Service shows 85 per cent of British Columbian consumers oppose the tax, B.C. businesses stand to gain about $2 billion each year, according to government forecasts. In a competitive economy, these gains should trickle down to the consumer by way of price reductions in goods and services.

Many Ontario businesses started planning for the HST months ago, so B.C. businesses have some catching up to do.

Here is a basic approach to getting ready: – Step one: Set up an implementation committee that involves your tax, finance, sales, purchasing, IT and budgeting and forecasting departments. – Step two: Assemble the committee on a regular basis and solicit members to generate a list of key sales tax questions or issues to be addressed within each department. – Step three: Create a flow chart of operating processes for each department. These departmental flow charts will help you identify the tax “touch points” to be considered. – Step four: Determine the correct “tax fix” at each touch point and implement the fix.

Here are some of the issues to consider: How will the HST affect operating expenses, capital expenditures and employee expense reporting? Should you buy new office furniture before or after July 2010? In terms of capital expenditures, should you lease or buy? What will be the effect on customer invoicing? How will the input tax credit restrictions affect you business?

Assembling a committee, generating questions and outlining key organizational processes will help your company make the right decisions and take advantage of the HST.

Here are a few other considerations: Your IT department will be a major player in adapting to the HST, since a new tax structure will have a significant effect on software systems. Make sure they are on side early with the company’s needs to minimize the potential disruption.

From a sales perspective, your customers may expect a price break if your organization is currently paying PST on purchases, which will be subject to recoverable HST after July 1. Recognize this expectation now and start the process of determining exactly how much you may be able to reduce prices. Your employees will be instrumental in facilitating the process, and can lend much support to the positive communication of the changes to customers. Make sure your employees are properly trained and understand the new tax regime.

This is not a solicitation to purchase securities, which is being made under an Offering Memorandum that details risk and is available on request. Mortgage investments are not guaranteed. Returns may fluctuate and past performance may not be repeated.

The introduction of the HST in Atlantic Canada taught us a valuable lesson: Businesses risk being left out in the cold if they do not properly understand the impact this new tax will have on their operations. Some B.C. businesses may be more vulnerable than others and should do their research early to mitigate the potentially negative effect of the changes.

North America’s economy is still fragile, and as we begin to exit the recessionary period, many businesses are still teetering on the edge of profitability. Not preparing adequately for a new tax regime can be the difference between capitalizing on the market rebound or “grinding it out” for another year.

Familiarizing yourself with the intricacies of the HST structure will position your business for growth. Your company’s bottom line is at stake, and foresight is a valuable asset when it comes to HST implementation.