On July 5, 2010, an group led by Bill Vander Zalm filed a judicial review with the Supreme Court of British Columbia to challenge the Liberal Government's actions to implement the HST. The two main orders sought are:
1. An order in the nature of certiorari quashing the Order of the Lieutenant Governor in Council No. 661, dated November 30, 2009, and approval given therein to the Minister of Finance to enter into the Comprehensive Integrated Tax Coordination Agreement with the Government of Canada; and
2. A declaration that the Comprehensive Integrated Tax Coordination Agreement between the Government of Canada and the Government of British Columbia dated November 30, 2009 is of no force or effect and a nullity.
In simple terms, the orders, if granted by the Supreme Court of British Columbia, would undo/remove certain procedural steps that have led to the HST implementation and could cause all HST house of cards to fall.
I have read a copy of the Petition to the Court and find that it raises serious procedural issues. The most interesting points are raised in paragraphs 10-11, 16 & 18 of the Petition:
10. On November 30, 2009, the Lieutenant Governor in Council, by Order in Council 691 made pursuant to s. 4 of the Ministry of Intergovernmental Relations Act, R.S.B.C. 1996, c. 303, purported to give authority to the Minister of Finance to enter into the Comprehensive Integrated Tax Coordination Agreement with the Government of Canada (the "CITC Agreement").
11. In the CITC Agreement, the Government of British Columbia agreed, subject to the requisite legislative approvals, to the imposition and implementation of PVAT in British Columbia. The CITC Agreement purports to authorize the Government of Canada to introduce the necessary legislative amendments to include British Columbia as a participating province under Part IX of the Excise Tax Act. The parties agreed that the PVAT would be implemented in British Columbia on July 1, 2010.
16. The British Columbia Legislature did not purport, in the Consumption tax Rebate and transition Act, to ratify the CITC Agreement, authorize the Minister of Finance to enter into the CITC Agreement or otherwise approve the PVAT for British Columbia.
18. The British Columbia has not ratified the British Columbia CITC Agreement.
In simple terms, the B.C. Liberal Government did not take the formal procedural steps required to approve the cornerstone CITC Agreement.
In addition, the B.C. Liberal Government did not that the legally and constitutionally required steps. Part 3 of the Petition sets out the laws that were not followed. This is the part of the case that will be fascinating for legal historians and constitutional law observers. The case will look into the well known principle of law associated with the Boston Tea Party - "No taxation without representation".
What is argued to be a fatal flaw of the HST implementation in British Columbia is "[t]he CITC Agreement did not originate in the [B.C.] Legislature, and has not been ratified or approved by the Legislature..." Taxation of the people was not done properly.
The questions raised in the Petition are important ones for the people of British Columbia and businesses. While businesses may be concerned that Mr. Vander Zalm may be correct and their input tax credits may be taken away, my humble view is that the case has been brought quickly and the answer will be provided relatively quickly [even though Mr. Joseph Arvay, Q.C. has voiced hope that the case will be head by August 1, 2010, judicial proceedings take time and appeals lengthen the process]. Businesses will be better off if the judicial review decision is quick - rather than having the issue raised and determined 10 years from now after a large assessment of a single taxpayer. If 10 years of tax collection and filing GST/HST returns is reversed 10 years from now, the retroactive uncertainty and ramifications will be worse for businesses.
The implementation of HST in British Columbia is major tax reform that was rushed to meet the July 1, 2010 date. If the Mr. Vander Zalm is correct (and I think he is raising very important points and he is knowledgeable in government procedures), he is doing the right thing for the citizens of British Columbia by asking for a judicial review of the government's procedural steps and constitutional and legal authority to implement the HST.