BC Supreme Court decision raises questions for lawyers
PST struck down on legal bills for low-income people
On February 8 Madam Justice Koenigsberg of the BC Supreme Court declared that the Social Services Tax Amendment Act, 1993 is unconstitutional and ultra vires the Province of BC to the extent that it applies to legal services for low-income people since it violates the right of those people to access justice: see Christie v. AG et al. 2005 BCSC 122 (available online at www.courts.gov.bc.ca/Jdb-txt/SC/05/01/2005BCSC0122.htm).
Following the decision, the Ministry of Provincial Revenue posted a notice on its website saying that, as a result of the BC Supreme Court decision, the 7% provincial social services tax should not be charged on bills for legal services for people whose net income falls below the Legal Services Society eligibility guidelines for its family duty counsel program (as those guidelines existed on February 8): see www.rev.gov.bc.ca/ctb/LegalServices.htm. The notice also stated that the Revenue Ministry was reviewing the case and that any further information will be posted on the website.
Lawyers who represent low-income clients should note that the Ministry of Attorney General has not yet determined whether it will appeal the ruling, and it is still unclear what position it will take on recovery of any uncollected tax should such an appeal be successful.
The Law Society has written to the Ministry of Provincial Revenue and the Ministry of Attorney General seeking clarification of this issue as well as a number of other issues that arise from the judgment. These include:
- the time at which a lawyer should assess a client’s income;
- how to assess a client’s eligibility for tax relief if the client’s income fluctuates;
- whether any portion of an award for lost income should be included in the assessment;
- what enquiries a lawyer must make to determine a client’s eligibility for tax relief;
- what documentation a lawyer requires to prove to provincial auditors that he or she has properly determined a client is exempt from the tax.
As of the time of publication, the Society was awaiting answers to these questions. In the interim, lawyers should familiarize themselves with the decision in Christie and advise clients of its implications. Lawyers who are acting for low-income clients may wish to consider a number of options (and the legal and ethical ramifications of those options). These may include, but are not limited to:
- delay rendering a bill until the government’s position is clarified;
- not bill the client for PST;
- not bill the client for PST and have the client swear a statutory declaration that his or her income falls within the exemption. (A sample statutory declaration is available on the Law Society website);
- bill the client for PST but hold the money in trust until these issues are clarified.
Please watch the Law Society website for the most recent updates.