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.
The Economic Benefits of Encouraging Small Businesses to Grow
The role of small businesses necessarily features prominently in any discussion of the British Columbia economy. Indeed, it is no exaggeration to say that an orientation toward small businesses is a defining characteristic of the province’s private sector.
Finlayson: Tax the rich! Oh, wait, we already do (Vancouver Sun)
The federal budget presented last March offered a timely reminder of something that many Canadians may not realize: a surprisingly big slice of the federal government's overall revenues comes from a single source, the personal income tax (PIT).
BC Agenda For Shared Prosperity Final Report
September 25, 2013 (Vancouver, BC) – The Business Council of British Columbia and the British Columbia Chamber of Commerce today released the final report of the BC Agenda for Shared Prosperity initiative. For a year, the two organizations have sought expert and community-based answers to the question: “How can BC become a more prosperous province for all British Columbians?”
Finlayson: BC's Carbon Tax Hurting Businesses (Vancouver Sun)
Carbon taxes have been attracting renewed attention. In late July Ottawa-based think-tank Sustainable Prosperity issued a report claiming that B.C.’s carbon tax has triggered a substantial and rapid-fire decline in fossil fuel consumption, leading to a sizable drop in provincial emissions of greenhouse gases.
Then a few days ago The Sun published an opinion piece from a local consulting firm suggesting that the average household in B.C. benefits financially from the carbon tax because of offsetting personal income tax relief measures introduced by the government.
Within North America, B.C. is certainly a pioneer in carbon pricing. Initially set at $10 per ton of emissions in 2008, the carbon tax rose to reach $30/ton in July 2012. The government has now frozen the tax for five years.
To date, no other province or state has instituted the type of broad carbon pricing regime found in B.C.
News Release: Business Council Calls for Renewed Focus on Competitiveness as BC Returns to PST
The province’s leading business organization today called for a renewed focus on competitiveness, as British Columbia re-establishes the Provincial Sales Tax (PST) following the decision to eliminate the Harmonized Sales Tax (HST) regime.
“We accept the decision made to restore the PST,” said Greg D’Avignon, President and CEO of the Business Council of British Columbia. “But policymakers and legislators need to understand that returning to the PST represents the single biggest tax increase on business in the province’s history – and will be a significant blow to BC’s competitiveness across a wide range of industry sectors in an increasingly competitive world.”
Let's Tax the Rich - Oh, We Already Do
Last week’s budget offers a timely reminder of something that many Canadians may not realize: a surprisingly large proportion of federal government revenue comes from the personal income tax (PIT). The second biggest revenue source is the corporate income tax, followed by the GST. According to the budget, in the upcoming fiscal year Ottawa’s PIT revenue will reach $131.5 billion, which amounts to half of all of the money collected by the national government.
Who pays the personal income tax? Most Canadian households except those with quite low incomes generally pay something. But an examination of data recently released by the Canadian Revenue Agency indicates that the PIT burden falls mainly on the most affluent families. Consider the following summary statistics:
2013 Federal Budget: A Combination of Following Through, Fiscal Restraint and Some New Funding for Priority Areas
Against a backdrop of softer economic conditions, Finance Minister Jim Flaherty tabled a budget still centered around achieving the Conservative government’s 2015-16 balanced budget target. To meet that objective, the Budget imposes meaningful but not draconian spending restraint. In turn, this left little capacity for much in the way of new spending or tax relief. The Budget does, however, direct additional funding to a few priority areas such as skills training and infrastructure investment.
Presentation: Federal Budget 2013 KPMG Breakfast
Economic outlook presentation by Jock Finlayson to the KMPG Federal Budget Breakfast, March 22, 2013
The Different Faces of Government Debt in British Columbia
Last month’s provincial budget provides updated projections of the government debt that has built up over time in British Columbia. Some media reports on the budget referred to the “accumulated government deficits,” while other reports mentioned the “tax-supported debt” or the “total provincial debt.” What do these different debt-related terms actually mean?
Finlayson: Rethinking Canada's anti-big business tax policy (Troy Media)
Canada ranks as one of the best places in the world to start a new business, according to an annual survey by the World Bank. But the country does less well in encouraging businesses to grow – and in generating private sector innovation.
The two phenomena are linked: an economic environment that supports business growth should also produce a high level of innovation, since growth-oriented companies are more likely to adopt innovative business strategies.
In thinking about these issues, Canadian policymakers would be wise to focus on the outsized economic contributions made by the sub-group of rapidly-growing small- and medium-sized enterprises. A 2010 study by the Kauffman Foundation for Entrepreneurship estimates that, in a typical year, the top-performing five per cent of American businesses – measured by their rates of employment growth – create two-thirds of all new jobs. And the top one per cent of firms are responsible for a remarkable 40 per cent of net new jobs.
Why Tax Competitiveness Matters
British Columbia is a small, open trading jurisdiction that relies heavily on natural resource exports to fuel the economy. While our economy continues to diversify (and that is a good thing) into more service oriented sectors, the core driver of the economy remains our exports, and natural-resource based products represent 70-75% of the province’s international merchandise export shipments. These exports, together with our strategic location and high quality of human capital, have combined to create a high standard of living.
In order to realize the theoretical benefits of these resources, there is also a need for sound public policies that enable development through effective planning, infrastructure development and tax/regulatory structures that attracts private sector investment. On this latter point, British Columbia’s historical track record is mixed, with significant improvements occurring in recent years that have helped to stimulate a lot of activity on the land base.
A 'Balanced' but "Challenging' Provincial Budget
In his inaugural budget, BC Finance Minister Mike de Jong delivered on the government’s long-standing promise to balance the operating budget by fiscal 2013-14. While some additional funding is provided for health care and a smattering of small-scale initiatives in support of the government’s Families First agenda, meeting the balanced budget target overshadowed all other aspects of the budget. Eliminating the fiscal shortfall of more than $1 billion on schedule required a combination of tax increases, provincial asset sales, and a hefty dose of spending restraint.
Five Things You Should Know about BC Budget 2013
1. The BC government’s operating deficit for this year is estimated at $1.2 billion, less than 3% of the pan-Canadian deficits from the national and all provincial jurisdictions
2. BC’s net debt equals 17% of GDP, the third lowest debt-to-GDP ratio in the country
3. According to Budget 2013, the BC government intends to limit the growth of program spending to just 1.5% per year over the next three years.
4. Capital spending is expected to fall from $6.8 billion this year to $6.2 billion in both 2013-14 and 2014-15.
5. Despite a one percent increase in the general corporate income tax rate (CIT), BC will continue to have a competitive CIT compared to other North American jurisdictions – however, the timing of this increase poses a risk for our overall competitiveness
Understanding the Limitations of Tax Increases – A Critique of CCPA’s Plea for Big Tax Increases on BC Businesses and Households
Recently, the Canadian Centre for Policy Alternatives (CCPA), a prominent union-backed Canadian think tank, released a study entitled “Progressive Tax Options for BC”. The basic premise of the study is that there is both a serious need and a significant desire among BC citizens for sizable tax increases to fund more services and re-distribute wealth to address inequality. In their words, BC has “plenty of room” to raise taxes. While this has been a common refrain from the CCPA for some time, this position is now backed with further research and the results of an on-line survey.
Thinking Through the Economic Consequences of Higher Taxes
As policy-makers in various jurisdictions consider options to generate more revenue by raising tax rates, instituting new taxes, or modifying existing tax rules, it may be useful to re-consider the economic consequences of following this path.
Submission: 2013 Provincial Pre-Budget Submission
The Business Council of British Columbia submits preliminary advice on the 2013 provincial budget to the legislature's Select Standing Committee on Finance and Government Services.
Jock Finlayson: Time for a reality check on financial market returns
For investors and savers, today’s financial environment must rank among the least rewarding in half a century, if not longer. In the major advanced economies – the US, Canada, Japan, the UK, and most of continental Europe – the “policy” interest rates set by central banks are at or near all-time lows. This translates into almost non-existent returns for savers who squirrel away money in bank accounts, GICs, and money market funds.
The same is true for the buyers of government bonds – ten-year government bond yields in Canada and the US now hover under 2 percent. With inflation projected to be at or above 2 percent, this means investors in government bonds who hold to maturity are on track for negative real (that is, after-inflation) returns. Despite this counterintuitive picture, there is no lack of demand for the sovereign debt of credit-worthy issuers.
BC More Than Holding Its Own Amid Global Economic Turbulence
At a time of pronounced global uncertainty, BC's economy continues to grow at a decent pace and to outperform many other North American provinces and states. Although there are significant downside risks, BC's economy remains quite resilient with a rapidly shrinking deficit, an increasingly diversified export sector and steady population growth.
Over the 2010-2011 period, BC’s real economic growth averaged 3% - the fourth strongest in Canada and among the top jurisdictions in North America. Although growth will ease over the coming 18 months, this resilience will help to sustain provincial economic activity and keep BC in a relatively strong position even in the face of weaker international conditions.
The Business Council's mid year economic review and outlook anticipates that BC’s economy will grow by 2.0% for 2012 and 2.2% for 2013. Relative to our January outlook there is no change in the forecast for this year, but we have trimmed our growth projection for 2013 due to global turbulence and a slower local housing market.
Canada's Economy in for a Rough Ride
By Jock Finlayson, Executive Vice President and Chief Policy Officer, Business Council of British Columbia
This summer marks the third anniversary of the economic recovery that began following the 2008 global financial crisis and the recession that descended upon much of the world in its wake. By any measure it has been a subdued economic rebound, particularly for many of the “advanced” countries that belong to the Organization for Economic Cooperation and Development (OECD).
Submission: Provincial Government's Expert Panel on Business Taxation
In response to the provincial government's request for input, the Business Council of British Columbia is pleased to share our views with the Expert Panel on tax measures that could be implemented to strengthen BC’s economy and competitive position as the province shifts from the HST back to the dual PST/GST system. The Panel is familiar with the benefits of the HST, and the many reasons why economists and public finance scholars almost universally see value-added taxes like the HST as an important and useful element in the revenue mix for governments.