Pulp mills like Harmac near Nanaimo would benefit from a break on their substantial power bills.

BC BUDGET: PST relief proposed for business electricity bills

Sales tax on power bills not only hits business, it's also charged on hospitals, schools and municipalities

Finance Minister Mike de Jong has accepted the advice of a business advisory group, proposing to take the provincial sales tax off business electricity bills over the next two years.

In his pre-election budget Tuesday, de Jong announced a plan to cut the PST on electricity in half effective Oct. 1, from seven per cent to 3.5. The rest would be removed in April 1, 2019.

Residential and farm power bills are already exempt from PST. Municipalities, hospitals and schools pay PST on their electricity purchases and would benefit from the change.

De Jong set up a Commission on Tax Competitiveness last year, and it identified B.C. as the only jurisdiction in North America that applies sales tax to electricity bills.

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.

“It’s good news for the pulp and paper industry, good news for our workers and communities,” said Len Posyniak, senior vice president of Catalyst Paper. “We’re BC Hydro’s largest industrial user, and we make up about five per cent of the load.”

The province currently takes in about $164 million a year from the tax. The finance ministry estimates that the elimination would save small and medium-sized businesses about $50 million a year.

The budget also proposes to reduce the small business income tax rate by half a point to two per cent. De Jong said that puts B.C’s small business tax at the second lowest rate in Canada, behind Manitoba which has no income tax on small business.