Provincial Sales Tax (PST) on Construction Contracts
Res #: 9-19M
Responses Received: Yes
Departments: Saskatchewan Ministry of Finance
WHEREAS the legislation on the Provincial Sales Tax (PST) for Saskatchewan construction contracts was changed by the provincial government in the 2017-2018 budget, with the new legislation requiring PST to be applied to construction contracts and to other service contracts;
WHEREAS with PST being added to construction contracts, including municipal contracts, this has increased construction costs to all municipalities;
BE IT RESOLVED that SARM lobby the provincial government to remove the Provincial Sales Tax from construction contracts for municipalities.
Responses From: The Ministry of Finance
December 18, 2019
As SARM noted in its resolution, the 2017-18 Budget expanded the PST base to include the full value of improvements to real property, including construction services. The tax changes introduced at that time were intended to begin a shift away from an over-reliance on volatile natural resource revenues, and towards more stable revenue bases like the PST.
I note that the reforms to the taxation of contracts and services for the construction, repair, renovation or improvement of real property included the removal of the PST paid by contractors on building materials, which improves cash flow for contractors and improves competitiveness with out-of-province contractors. The application of PST is now more like the way in which the Goods and Services Tax (GST) is applied, however PST does not apply to the purchase of land in Saskatchewan as it does with the GST.
I would also note that Saskatchewan’s PST is a tax of general application, applied to a broad base of goods and services. This broad application ensures that a fairly applied, reliable and sustainable source of revenue is available to finance the many public services provided by this Government, including grants to the municipal sector and other priority public services such as health care and education.
As you may be aware, Saskatchewan’s 2019-20 Budget was balanced with no new taxes or increases to existing tax rates, including income, property and sales taxes. The 2019-20 Budget delivered a strong and sustainable fiscal plan that achieved the right balance to strengthen our economy and make life affordable for Saskatchewan people.
Now that we have achieved our goal of returning to balance, we want to ensure that this fiscal position is sustainable into the future, at which time we will be able to take a fresh look at our entire range of tax policies, to determine whether we might be able to provide some tax relief to our residents and/or businesses in areas where it is most needed and would have the greatest economic impact.
Donna Harpauer – Minister of Finance