Fiscal & Tax Policy
As a small, open trading region, BC depends on investment and trade to support ongoing economic development and public services. A competitive tax regime and balanced government finances are key advantages in attracting investments to BC. The Council plays an important role in analyzing BC’s fiscal policies relative to other jurisdictions and advocating for reforms that boost our competitiveness.
Finlayson & Peacock Op-Ed: Economic policy advice for B.C.’s new ‘GreeNDP’ government (Business in Vancouver)
As a new B.C. provincial government gets ready to assume office, there is an opportunity for a fresh agenda and new perspectives. The BC NDP government will inherit an economy that has been outpacing the rest of the country in the growth of overall output, employment and consumer spending. However, B.C. also faces several structural challenges that in some ways belie the happy picture of robust economic growth. These challenges include excessive reliance on a frothy housing market and outsized real estate sector; alarming levels of household debt; tepid productivity growth; sluggish business investment; waning competitiveness in some key segments of the province’s export economy; and a housing affordability crisis that is affecting many parts of the Lower Mainland.
In these circumstances, the new government will need to proceed carefully in defining and implementing its policy agenda.
BC Economic Momentum Carries On
The BC economy remains healthy, with nearly all sectors contributing to the ongoing expansion. The momentum from last year is carrying forward more so than previously anticipated, prompting us to adjust our 2017 forecast upwards.
Finlayson & Peacock Op-Ed: Income tax rates: Canada’s growing competitive disadvantage (Business in Vancouver)
Among all advanced economies, Canada imposes one of the heaviest income tax burdens on highly skilled people
The federal budget presented last month offered a timely reminder of something that many Canadians might not realize: a huge slice of Ottawa’s revenue comes from a single source, the personal income tax (PIT). Federal PIT revenue is projected to reach $152 billion in 2017-18, which is half of all of the money hoovered up by the national government. PIT is also the No. 1 revenue source for the provinces, although it makes up a significantly smaller portion of their tax base than of Ottawa’s.
Finlayson Op-Ed: Canada's over-hyped clean-tech revolution (Troy Media)
Across Canada, politicians have become bedazzled by the potential of the “clean tech” sector to drive economic growth. The 2017 federal budget earmarks more than $2.2 billion in new spending to boost the industry, with a particular focus on accelerating the commercialization of products and technologies that promise to lessen the environmental impact of energy and water use, transportation, and other industrial activities.
2017 Federal Budget: Lots of Words, Few New Measures
A principal theme of this Budget is the need to improve Canada’s lagging performance on private sector innovation, with the federal government directing funds to stimulate growth in six key innovation-based industry sectors and pledging to develop a handful of “super clusters” across Canada.
RELEASE: Budget 2017 Offers Opportunities for Innovation, But BCBC Cautious on Canada's Overall Competitiveness
Today's federal budget, delivered at a time of significant global uncertainty, abrupt shifts in markets, and accelerating technological change, offers new opportunities for innovation and emerging sectors. However, the Business Council of British Columbia remains cautious on the implications of the continued federal deficit and questions whether enough is being done to strengthen Canada's competitiveness.
Finlayson Op-Ed: A closer look at the 2017 BC Budget (Business in Vancouver)
Parsing the details of the Liberal government’s 2017 budget offers a number of insights into British Columbia’s $270 billion economy. The first and most significant is the advantage conferred by economic and industrial diversification.
BC Budget 2017 Analysis
Budget 2017 is a good news budget. While it falls shy of being a “something-for-everyone” document, it does announce some useful tax/premium reductions along with increased spending in a number of high priority areas. It also extends the province’s track record of sound fiscal management. Apart from the risk stemming from the high debt load of certain Crown corporations, Tuesday’s budget reinforces BC’s top notch credit rating.
NEWS RELEASE: Budget 2017 Moves Toward Improved Business Competitiveness While Still Balancing the Books
Victoria - The Business Council of British Columbia welcomes today’s provincial budget, which managed to find room for tax relief while maintaining the government’s commitment to balance the budget. This is a noteworthy accomplishment at a time of global uncertainty and when most other provinces continue to face budgetary shortfalls. Keeping the books balanced reaffirms the government’s commitment to prudent fiscal management, and provides BC with some policy flexibility going forward.
“Delivering a balanced budget within a climate of modest economic growth and a mixed outlook for commodities sets BC apart and signals that the province is a stable place to invest and do business,” said Greg D’Avignon, President and Chief Executive Officer of the Business Council of British Columbia. “We congratulate Minister de Jong and his cabinet colleagues for their continued focus on disciplined expenditure management.”
BC2035 is about creating a shared vision of BC’s future and laying down a pathway to realize that vision. It is about initiating conversations, fostering greater collaboration and getting politicians, policy makers, First Nations leaders, and business leaders to think about, prepare for and act on the future.
Finlayson & Peacock Op-Ed: Retooled U.S. tax regime could erode Canada’s competitive advantage (Business in Vancouver)
As U.S. President Donald Trump settles into office and the Republican-controlled Congress begins work on its legislative agenda, it is clear that sweeping changes are in store for U.S. policies in several areas. Overall, the direction of change is likely to pose some significant economic challenges for Canada.
Finlayson Op-ed: Trump's energy, environmental policies threat to Canadian business (Troy Media and Times Colonist)
As President-elect Donald Trump prepares to assume office, it is clear that major changes are in store for American climate and energy policy. Mr. Trump’s cabinet appointments, read in conjunction with the Republican Party’s platform in the 2016 election, leave little doubt that the United States will be adopting an approach to climate and energy policy that differs markedly from the one embraced by the outgoing Obama administration.
Better, But Still Rising Steadily: An Update on Municipal Spending in Metro Vancouver
In real per capita terms, municipal government expenditures in Metro Vancouver grew by 6.9% over the past five years. This is a notable reduction from the 20% jump recorded between 2005 and 2010.
NEWS RELEASE: Business Council of BC Welcomes Report by Commission on Tax Competitiveness
The Business Council of British Columbia welcomes the report issued today by the Commission on Tax Competitiveness that was appointed several months ago to examine the structure and impact of business taxes and to provide policy options that will support growth and job creation in BC.
At a time of sluggish global economic growth, heightened competitive pressure for small regional economies, and accelerating technological change, it makes sense to review the role of tax policy in shaping the environment for business activity. Particularly for trade-dependent jurisdictions like British Columbia, a broadly competitive tax system is essential if we are to attract the investment and stimulate the entrepreneurial wealth creation needed to sustain jobs and grow incomes.
“The Commission on Tax Competitiveness’s report outlines a number of valuable recommendations for the provincial government to consider, including some that we hope will be taken up in the February 2017 budget, and others that can be acted on over the medium-term,” said Greg D’Avignon, President and CEO, Business Council of British Columbia. “The Business Council commends the provincial government for establishing the Commission. We look forward to the province acting on the Commissions’ recommendations to strengthen the foundations for BC’s economic prosperity.”
Peacock Op-Ed: Looking to B.C. Budget 2017 — Strengthening B.C.’s Competitive Position (Surrey Business News)
B.C.’s economy is in reasonably good shape and the province looks to be on track to lead the country in economic and job growth this year and likely next year as well. This relatively buoyant economic backdrop is boosting B.C. government revenues and providing the province with some fiscal room. The recently released First Quarterly Report shows the B.C .government with a $2 billion surplus in 2016-17, thanks mostly to upside revenue surprises from personal income taxes and the property transfer tax.
While all this is good news, the fact is that British Columbia’s competitiveness within North America has eroded over the past several years. The extent of the problem varies across sectors and industries. But companies operating on the land base, manufacturers, and industries that rely significantly on energy to run their operations face mounting difficulties stemming from complex First Nations claims, onerous permitting and environmental rules, and high and still rising tax-inclusive energy costs. Across the province, the forestry, mining, and oil and gas industries are at the forefront of these challenges. Closer to home, in Surrey the agriculture industry and local manufacturers (lumber mills, parts of food processing, industrial equipment, high-tech) are all also challenged by B.C.’s deteriorating competitive position.
Finlayson & Peacock Op-Ed: B.C. tax regime hurts new investment in equipment, technology (Business in Vancouver)
While B.C. has recently posted some impressive economic numbers compared with the rest of the country, in a few areas we continue to underperform. The most glaring example is non-residential business investment.
Investment in “tangible” capital, such as machinery, equipment, structures, advanced technology products and engineering infrastructure, is essential to a thriving business sector. Increasingly, investment in “intangible” forms of capital, such as research and development, patents, trademarks, business processes and employee training, is also becoming a key ingredient in business success. Both kinds of capital contribute directly to economic growth and job creation in the short term. And with time, the benefits of such investments are magnified. Expanding and improving the stock of capital means that employees have up-to-date machinery and equipment, modern facilities, more efficient infrastructure and better intellectual property products to work with, allowing them to become more productive (and, hopefully, to earn more).
Finlayson & Peacock Op-Ed: B.C.’s economic buffer in the energy downturn: real estate (Business in Vancouver)
BC’s economy looks to be in decent shape. The province led the country in economic growth last year and will likely do so again in 2016. In the U.S., just six of the 50 states exceeded B.C.’s 3% GDP growth rate in 2015.
So why is our province faring so well? One reason is that we don’t produce much oil and so have avoided the worst fallout from the worldwide oil price collapse. The weaker Canadian dollar has also helped. Non-resource manufacturing, high technology goods and services, agricultural products, tourism, and film and television production have all enjoyed hefty gains, in part because a feebler Canadian dollar makes them more competitive in the North American market. But other provinces also benefit from a cheaper currency.
In fact, much of B.C.’s recent success reflects the unusual strength of the domestic economy. And supported by record low mortgage rates and steady inflows of migrants and wealth from outside our borders, the residential housing complex has had a starring role in B.C.’s robust domestic economy, via new home construction, high levels of renovation spending and escalating home prices.
Finlayson Op-Ed: How Canada can put its economy back in gear (Troy Media & The Province Newspaper)
“Building an economy that works for the middle class” is the preferred mantra of the Trudeau government now ensconced in Ottawa. Rarely these days does one encounter a federal government news release that fails to tout the benefits of a thriving middle class. The term “middle class” itself, however, is never defined, making it difficult to know if progress is being made in delivering on what the government describes as its most important objective.
On at least some measures, the middle class in Canada actually looks to be doing reasonably well. Take incomes, for example. From 2010 to 2014, the total pre-tax income of the typical family – defined, statistically, as the “median” family consisting of two or more related persons – rose from $80,900 to $87,000, in constant 2014 dollars. This amounts to an increase (after inflation) of 7.5 per cent over four years – a decent gain.
Finlayson& Peacock Op-Ed: 15% property transfer tax should not apply to non-Canadians who move to Metro Vancouver for bona fide employment reasons (Business in Vancouver)
The way the government designed its property transfer tax scheme means that it will impose a stiff financial penalty on foreigners who locate here to take jobs.
The Lower Mainland’s frothy housing market continues to attract a great deal of media and political attention. In late July, the B.C. government responded to mounting public anxiety over soaring housing prices by instituting a 15% property transfer tax (PTT) on “foreign” purchases of residential real estate in Metro Vancouver. This measure predictably has raised the ire of the real estate industry, in part because it has captured, unfairly in our view, many in-process transactions that pre-date the effective date of the tax.
It is unclear whether the higher PTT will dampen housing demand. Initial evidence does point to some slowdown in the pace of real estate activity. The fact that foreigners have been responsible for at least 10% of all residential property purchases in the Vancouver region suggests that the new tax should have some effect.
Commissioned Paper: Fiscal Options for Building a Prosperous British Columbia - By Kevin Milligan
BCBC commissioned an independent review of the efficiency, effectiveness and fairness of British Columbia’s current tax system, and potential policy approaches to modernize the system in the context of today's economic realities. The Milligan paper notes that BC faces two key fiscal challenges: generating the government revenues needed to fund public programs and services going forward, and ensuring a healthy level of investment and business growth to sustain a strong economy.