Surprise $600,000 GST bill prompts action
South Peace News
The Alberta Urban Municipalities Association [AUMA] has passed an emergency resolution supporting the Town of Peace River in its fight against a surprise $600,000 GST bill largely for donations to the Baytex Energy Centre project.
“We put forward a special resolution at AUMA requesting not just moral support, but also material support on our legal appeal on the GST decision,” says Peace River Mayor Tom Tarpey.
The annual AUMA convention was held from Sept. 25-27 in Edmonton.
According to AUMA, an Extraordinary Resolution deals with an issue of concern to the general membership that came up after the May 31, 2019 resolution deadline, “where a critical aspect of the issue needs to be or will be addressed before the next convention.”
The GST bill was sent to the Town this summer after the CRA upheld an auditor’s report which found that items on intermunicipal cost share agreements in the Peace region constituted “supply,” specifically citing the non-discrimination clause in the Town’s intermunicipal agreement as somehow giving local municipalities special access to the new facility.
The CRA had previously audited the Town in 2011 and had not assessed the Town for GST based on the clause, even though it was already in place.
Peace River has raised the concern that if their cost sharing agreements could cause them to get a surprise tax bill, other municipalities could be reassessed too. Town administration has also expressed frustration about how they are supposed to determine when and where to charge GST going forward.
The background information in the resolution states, “While this finding currently rests on a single case, it establishes a precedent which affects any municipality or public body which has entered into a cost sharing agreement. Given that any GST collected in the course of a cost sharing agreement is reflected by an input tax credit, this finding does not affect the balance of GST revenue received by CRA. It does, however, impair the ability of municipalities to enter effective agreements, appropriately collect/remit GST, and maintain accurate financial statements.”
The emergency resolution on taxation had to get a two-thirds majority vote before even being considered at the AUMA resolutions session.
The AUMA emergency resolution on the taxation of intermunicipal cost sharing agreements states that “Section 55(1) of the Municipal Government Act [MGA] permits a municipality to enter into an agreement with another municipality to share grants paid under section 366 or taxes … and the Canada Revenue Agency’s [CRA] GST/HST Technical Bulletin B-067 provides that a transfer payment made for a public purpose does not constitute a taxable supply.”
It adds “the CRA has recently determined that a cost share agreement may constitute a taxable supply” and since the MGA now makes it mandatory for municipalities to establish intermunicipal collaboration frameworks that include cost sharing agreements for infrastructure and services, “there now exists a situation whereby municipalities are required to enter into agreements with no clear provision for ascertaining the taxation status of matters within the agreements.”
“It is therefore resolved that the AUMA engage with the Federation of Canadian Municipalities, other municipalities and municipal organizations to advocate for the CRA to officially confirm intermunicipal cost sharing arrangements and resulting fund transfers as being made for a public purpose and therefore not constituting a taxable supply; and further be it resolved that the AUMA provide material assistance in the preparation of the appeal to the minister.”
The emergency resolution was moved by Mayor Tom Tarpey and seconded by the mayor of Olds. Olds has an intermunicipal agreement with identical wording to the Town of Peace River’s agreement with its neighbours.
The resolution passed with the support of 96.7 per cent of the AUMA membership.
“We got overwhelming backing by the delegates at AUMA, overwhelming,” says Tarpey.