+ RMA Rural Municipalities
of Alberta

Resolution 15-02F

GST Input Tax Credits

January 1, 2002
Expiry Date:
December 1, 2005
Active Status:
Vote Results:

WHEREAS municipalities must look at efficient and effective ways of providing municipal services; AND WHEREAS circumstances arise where a municipality may act as a third party contractor and maintain roads outside of the municipalitys jurisdiction for the provincial government, another municipality, or for private contractors;AND WHEREAS Schedule 5, Part 6, Section 21 (1) of the Canada Excise Tax Act precludes a municipality, even when it is acting in the capacity of a third party contractor, from collecting Input Tax Credits for maintenance performed on public roads;

Operative Clause:

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties urge the Government of Canada to amend Schedule 5, Part 6, Section 21 (1) of the Excise Tax Act to allow municipalities to claim Input Tax Credits when the municipality is acting as an agent or contractor for another government body for the maintenance of public roads for which the other governmental body has responsibility.AND FURTHER BE IT RESOLVED that the AAMDC seek the support and assistance of the Federation of Canadian Municipalities in encouraging the requested legislative amendments.

Member Background:

In 2001, Clearwater County was audited by the Canada Customs and Revenue Agency. During the audit process, the County put forward the argument that the County should be entitled to Input Tax Credits (ITC) (100% GST refund) on work associated with maintenance work performed by the County while it was acting as contractor for the provincial government with respect to maintenance of Secondary Highways. The County was informed that Schedule 5, Part 6, Section 21 (1) of the Excise Tax Act specifically precludes municipalities from claiming ITCs for maintenance work on public highways, regardless of whether the road is managed by the municipality or the municipality is acting as a contractor/agent for the provincial government, another municipality or even a private company.When the Excise Tax Act was first drafted the concept of public/public partnerships or public/private partnerships was obviously not anticipated. Times have changed and municipalities are constantly looking for ways of doing work as efficiently and effectively as possible. It is not uncommon for municipalities to contract other municipalities to provide specialized roadwork (e.g. a village contracting crack sealing from a rural municipality) or for one municipality to contract another municipality to perform road maintenance in a remote area. In these types of situations the contracted municipality is operating the same as a private contractor, however because they are a municipal government the Excise Tax Act precludes them from collecting Input Tax Credits.Schedule 5, Part 6, Section 21 (1) of the Excise Act discriminates against municipalities and discourages intergovernmental cooperation, and must be changed.

RMA Background:

The AAMDC has no resolutions currently in effect on this issue; however the association has been working in partnership with the Government Finance Officers Association and individual municipal members to identify opportunities to address inequities within the Excise Tax Act and regulations under that Act, in order to minimize municipal GST liability.

Federal Ministries and Bodies:
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