Mr. Speaker, most services provided by school authorities are exempt from the goods and services tax, the GST. Exempt treatment means that school authorities do not charge GST on the exempt services they supply, but cannot claim input tax credits to recover the GST paid on inputs used to provide their exempt services. School authorities can, however, claim rebates of the otherwise unrecoverable GST paid. This rebate was set at the time of introduction of the GST to maintain a similar tax burden for the school sector as existed under the former federal sales tax. The rebate rate for school authorities is 68%.
The Tax Expenditures and Evaluations 2012 report indicates that school authorities received an estimated $360 million in GST rebates in 2012. On that basis, increasing the GST rebate for school authorities to 100% from 68% would cost an estimated $170 million annually.
School authorities have benefited from the decision of the Government of Canada to reduce the GST rate from 7% to 5% without reducing the rebate rate for school authorities. As a result, the effective GST rate on school authorities’ taxable purchases dropped from 2.24% to 1.6%.