By Marguerite (Meg) Shaw

It is 2005, a new year, an important year, an election year. Will the social services tax (SST) on legal services finally be rescinded? The NDP government imposed the tax on legal services in March of 1992, generating hundreds of millions of dollars over 13 years of payments by the taxpayers of B.C. who are users of legal services. The Branch has consistently advocated for elimination of this unfair, discriminatory, and arbitrary tax.

In the past year, our advocacy effort has been strengthened with the allocation of campaign resources and the appointment of an SST Task Force with representation from lawyers around the province.

In November, Frits Verhoeven, Secretary Treasurer of the Branch presented a submission on our behalf to the Finance and Government Services Committee (FGSC), which prepares recommendations to the Minister of Finance for pre-budget consideration. This was an exceptional year in that, for the first time ever, other significant organizations included the elimination of the SST on legal services in their presentations. This came about as a result of lobbying efforts by the Branch.

We have had strategic meetings with organizations representing business and consumers throughout B.C., such as the Business Council of B.C., to discuss how the SST on legal services is an important issue and negatively impacts their members. The tax on legal services is a competitiveness handicap for existing businesses, and a barrier to encouraging new business or expanding business in B.C.

In the words of Vincent Morgan, Administrative Partner at Davis & Company, “As an admitted tax on business it is a disincentive for business to open up or expand in British Columbia. All things being equal who would open up a new business or expand an old one in this province for the privilege of paying a seven per cent tax on the legal fees associated with that opening or expansion or subsequent operations? In this regard the tax on legal fees is analogous to the sales tax on machinery, aviation, and bunker fuel purchases and the corporation capital tax, all of which made some aspect of British Columbia business less competitive and all of which are presently (August 2001) in the process of being repealed.”

This year the Finance and Government Services Committee made 19 recommendations to the Finance Minister, ranging from measures to improve education to targeted tax reductions for retail merchants and small businesses. Although the report did not contain a specific recommendation for the elimination of the SST on legal fees, the Committee did recommend that the Minister consider further tax reductions and conduct a review of existing exemptions.

With the government projecting large surpluses for the next several years, there is no better time to get rid of this discriminatory tax. Legal services are not a luxury; they are the “glue” that holds our province, our economy and our society together. The tax on legal services unfairly penalizes individuals and businesses that already contribute their share of taxes, and it diminishes costs awarded in injury and civil law cases. It’s time for this government to do the right thing and eliminate the SST on legal services.

Marguerite (Meg) Shaw is Vice-President of the CBABC and Chair of the CBABC’s Social Services Tax Task Force.

This article was published in the February 2005 issue of BarTalk. © 2005 The Canadian Bar Association. All rights reserved.