TOWN OF

P 0 BOX 1509 5116 50 AVENUE ROCKY MOUNTAIN HOUSE AB T4T 1B2

August 26, 2019

Member of Parliament, Jim Egllnski 119 - SQth Street Edson, T7E 1V9

Dear Mr. Egllnski,

RE: Town of Peace River GST Audit Concern

Town Council of Rocky Mountain House has been informed of the recent, disconcerting actions by the Revenue Agency (CRA), when the Town of Peace River underwent a routine GST audit. We are partnering with the Town of Peace River to express our concerns regarding the implications of the ruling that intermunicipal cost sharing agreements are subject to Federal Goods and Services Tax (GST).

When the CRA reinterpreted the questions of 'supply', 'public purpose', and 'third party benefit', with respect to cost-sharing agreements, they fundamentally changed how GST is audited, thereby creating an unexpected audit outcome.

As the Town of Peace River has already outlined, this ruling - a reinterpreting of CRA bulleting on GST for Grants and Subsidies - has set a number of precedents which will be problematic for municipalities:

1. An auditor is now permitted to 'parse' an existing agreement to justify a finding even if the remainder of the agreement contradicts that finding.

2. Municipalities are no longer able to rely on the GST/HST Technical Information Bulletin B-067 with respect to determining supply as It relates to on-going programs of financial support.

3. It is no longer clear which cost-share items may be now assessed as supply. Furthermore, transactions not contained within the cost-share agreement are being assessed as though they were.

4. The required ICF Agreements will now have to include a tax provision. Given the lack of consistency in how the regulation is being applied, this could prove to be extremely challenging in terms of determining which services should be considered supply. Municipalities must be prepared to have a future auditor reinterpret the agreements yet again. The cost of reversing any collection or remitting will create a substantial economic burden. , \ i-'< BOCH ^ Telephone 403-845-2866 Fax 403-845-3230 Webpoge: www.rocbvmtnhouse.com E-mail: [email protected] ' TOWN OF ROCKY MOUNTAIN HOUSE

P O BOX 1509 5116 50 AVENUE ROCKY MOUNTAIN HOUSE AB T4T 1B2

Town Council of Rocky Mountain House is joining the Town Council of Peace River in their advocacy effort to assist in having this ruling be reconsidered. Furthermore, we have included our respective MLA and MP on this letter, who have the ability to press for a reconsideration of this ruling.

Thank you for your attention to this very serious matter.

Sincerely,

Mayor Tammy Burke

CC: Honourable , MLA for -Rocky Mountain House- Honourable Kaycee Madu, Minister of Municipal Affairs, President of FCM, Bill Karsten President of AUMA, Barry Morishita President of RMA, A! Kemmere NADC Council Peace River Town Council Town Council CAO, Dean Krause

, t ii :'V. • ROGKY Telephone 403-845-2866 Fax 403-845-3230 >^OUNTAIN HOU^' Webpage: www.rocbvmtnhouse.com E-mail: [email protected]