September 16, 2009

Tax reform

Ontario changes HST contract clause for road builders

In response to a request from the Ontario Road Builders’ Association, the province’s Ministry of Transportation has changed the wording of a tax-related clause in its general conditions of contract.

The move comes in advance of the anticipated harmonization next July of the federal and provincial sales taxes.

“Our members were seeking clarity on how they should bid work that will continue past July 2010,” said ORBA executive director Rob Bradford.

“They were unsure whether to assume that the tax regime would change at that time and account for the changes in their bid or to bid based on the current tax regime and assume that any changes would be dealt with as adjustments to the contract.”

Currently, contractors include the federal goods and services tax in their bids and depending on the product or service being offered, provincial sales tax as well.

The new clause stipulates that contractors should prepare tender prices based on the tax system at the date of tender opening. Contractors should not include anticipated impacts of implementation of the HST in preparing tender prices.

“Where a change in Canadian federal or provincial taxes occurs after the date of tender closing for this contract, the owner will increase or decrease contract payments to account for the amount of tax change,” the clause states.

The McGuinty government recently announced plans to harmonize the two taxes. When the HST comes in effect, there will be a single tax of 13 per cent.

-PATRICIA WILLIAMS

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