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BC Budget 2014 - Balanced and Uneventful
Operating within a very tight fiscal framework, Finance Minister Mike de Jong tabled a budget on Tuesday that projects a small surplus for fiscal 2014-15, followed by larger surpluses in the two subsequent planning years. Given the limited fiscal maneuvering room, the Budget contained only a handful of modest spending measures and a few small tax initiatives. Notably, there was nothing major in the area of skills training.
While some commentators will be critical of the limited spending increases, we recognize the accomplishment of keeping the budget in the black without imposing significant tax increases – something few other provinces are managing to do. Running surpluses puts BC in a strong fiscal position, especially at this juncture of the business cycle. The Business Council believes BC’s competitive position has eroded in recent years. Although fiscal circumstances prevented the government from cutting or restructuring taxes, this is an area the province will have to address in the future as some BC industries face challenges linked to the province’s move back to the antiquated Provincial Sales Tax (PST), while others are grappling with the steepest carbon tax in North America, skilled labour shortages, onerous municipal property taxes on industry, and steadily escalating electricity costs.
- The new Budget projects a small surplus for the upcoming fiscal year, followed by slightly larger surpluses in the following two years of the fiscal plan
- There is an abundance of caution built into the Budget including conservative growth assumptions for the provincial economy and BC’s trading partners, sizable forecast contingencies, and below consensus projections for the future path of natural gas prices
- The government has been effective at containing spending, which is reflected in very limited increases in overall expenditures
- There were a few modest tax increases: MSP premiums go up 4%, smokers will pay more and the threshold for the homeowners grant was lowered
- In keeping with the government’s Families First agenda, a tax credit of $55 per month for children under six years of age was announced (overall $350 million is directed towards lower income individuals, families and communities)
- The tax credit for eligible research and development spending was extended, which is good news for the province’s technology sector and other industries with significant research agendas
- The provincial debt climbs higher, but the key taxpayer-supported debt-to-GDP ratio begins edging lower this fiscal year
- Somewhat surprisingly, there was nothing significant in the Budget relating to skills training
- A proposed two tier income tax structure for the LNG industry was announced, with some flexibility to ensure the tax regime is globally competitive and the details to be finalized by the fall