Get rid of the tax, says CBABC president

Every month, the lawyers of B.C. are required to collect from clients about $10 million dollars in government tax on legal services. That’s more than $300,000 every day of the year, taken out of the economy directly from the pockets of individuals and businesses.

Right now, untold millions of dollars are in legal limbo, sitting in trust accounts around the province. The amount grows every day. Meanwhile, the government of B.C. is taking its fight to keep the tax to the Supreme Court of Canada. The Canadian Bar Association will be intervening in that case on behalf of the profession.

The tax was declared unconstitutional in part in the Christie cross-appeal decision, but that decision was later made subject to a partial stay pending the government’s SCC appeal. Lawyers are now required to collect the tax on all legal services, but to hold it in trust in some cases and remit it to government in others. The question is: which legal services fall into which category?

The tax has been declared unconstitutional “to the extent that it purports to tax legal services related to the determination of rights and obligations by courts of law or independent administrative tribunals.” The government has said it will release guidelines to provide direction to lawyers about what kinds of services do and don’t fall under the Christie decision and subsequent partial stay. The Law Society has confirmed that lawyers will not be penalized for holding the monies in trust until the guidelines come out.

Lawyers in B.C. are confused and frustrated with the current state of affairs. The added administrative burden is a serious hardship for small firms and sole practitioners in particular, who make up the majority of the B.C. Bar. “Everyone’s tired of collecting a tax that makes no sense,” said CBABC President Meg Shaw. “No other professional service is taxed by the province in B.C., and no other province singles out legal services for a tax – in Alberta and Ontario, our closest competitors, access to justice is not subject to provincial tax at all.”

In March, the CBA commissioned and publicly released an economist’s report that bolsters the case for scrapping the tax. The CBA and B.C.’s Chamber of Commerce jointly issued a news release stating that it is absurd for the government to continue to collect a tax that MLAs, the courts, businesses, and economists have all acknowledged as unfair and discriminatory.

Said President Shaw: “Our message to B.C.’s government and Opposition members is simple: Do the right thing for B.C. – remove the tax on legal fees – now!”

This article was published in the April 2006 issue of BarTalk. © 2006 The Canadian Bar Association. All rights reserved.