It's Becoming More Costly and Complex to do Business in B.C.

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2-Minute Brief:

The tax burden on B.C. businesses has increased significantly in recent years. This fiscal year companies in B.C. are paying nearly $5 billion in “extra” or additional taxes, due to a number of new taxes and tax increases implemented since 2013. At the same time, competing jurisdictions have cut or are cutting taxes and taking determined steps to become more competitive. B.C. is moving in the opposite direction: increasing the tax burden on firms and making it more complex and more expensive to operate and grow a business.

What is behind the rising cost of doing business in this province? It is the result of policy decisions and changes. On their own any single change could be absorbed by business without too much difficulty. The challenge is the cumulative impact of numerous changes. Over the past few years, the corporate tax rate has increased, the carbon tax has risen, a new employer health tax was introduced and a host of environmental reviews and regulatory changes are making it costlier and more complex to operate in B.C..

The top three biggest tax increases to B.C. businesses since 2013 are:

  1. The single biggest tax increase is linked to the elimination of the HST and return to the provincial sales tax. Under the PST system, businesses are paying an estimated $3 billion in sales tax on business inputs. Under the HST system businesses would not pay sales tax on business inputs.
  2. The new Employer Health Tax is also a large tax hit. Once MSP premiums are fully eliminated next year, we estimate the net tax impact on business will be approximately $800 million in additional tax, paid mostly by large and medium-sized businesses.
  3. The third biggest tax increase flows from a two-percentage point increase in the provincial corporate income tax rate, which adds an additional $700 million to income tax paid by business.

In addition to these tax increases, businesses are also contending with changes to labour laws and regulations that are adding to operating costs. The minimum wage is up by more than 20%, and changes to the B.C. Labour Code and Employment Standards Act are also adding to costs. Environmental regulations are making it much more difficult for businesses to operate on the land base.

Taken holistically, the cumulative impact of higher taxes and mounting regulatory costs is weighing on investment and business sentiment in B.C. We are concerned that over time companies will become more tentative about investing in B.C. and deploy capital in other jurisdictions.