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BC Budget 2018 - Higher Business Taxes Plus Additional Spending Measures
In her first full Budget, Finance Minister Carole James focused on social programs, housing issues and delivering relief for low and middle-income families. As part of this broader agenda, the Minister announced steps towards fulfilling the government’s longer-term commitment to universal and affordable childcare and addressing serious housing affordability challenges. While many of the changes in the housing realm were anticipated, the scope and magnitude of the measures being taken to dampen housing demand leave little doubt that the NDP administration is taking dead aim at speculative activity and want to greatly limit the role of non-resident buyers in residential real estate markets.
Incremental tax revenue from housing-related measures as well as a new employer payroll tax will provide the government with added revenues which, together with revenue growth from a still expanding economy, will give the government some manoeuvring room as it works to flesh out the NDP’s ambitious agenda. While we are worried about the increased tax burden on employers amid a host of other tax, fee and regulatory cost increases for business, at least the government steered clear of further hiking personal and corporate income taxes. Particularly in light of far-reaching tax policy changes in the United States, now is not the time to be adding to the already heavy income tax burden in Canada.
SUMMARY: BCBC's #BCBudget2018 Analysis
- Finance Minister Carole James delivered a Budget that outlines a plan for three years of skinny surpluses. There is a fair amount of cushion built into the plan, which should allow the targets to be met.
- The Budget expands program spending in areas highlighted in the NDP’s election platform. The new spending will help many low and middle income British Columbians. Notably, an estimated 86,000 families will receive new funding for daycare.
- The key tax change is a new Employer Health Tax (EHT) that will replace lost revenue when MSP premiums are eliminated and generate almost $2 billion in revenue for the government. Most large and mid-size BC employers will face escalating payroll costs once the EHT is in place.
- The government has introduced an unprecedented suite of measures intended to curb housing demand, particularly from non-residents, including a so-called Speculation Tax that is really an additional annual property tax on non-resident homeowners who do not pay any provincial income tax.
- The Additional Property Tax (previously called the Foreign Buyers’ Tax) is also increased and its application expanded to capture several other urban regions.
- The Business Council is concerned that the Budget does little to improve BC’s investment climate, nor does it acknowledge the province’s lagging investment performance. Firms in BC are also looking carefully at the sweeping tax reform package recently adopted in the United States, which has sharply eroded any business tax advantage Canada may have enjoyed and made it more attractive for companies looking to invest in productive assets to do so south of the border rather than in our jurisdiction.
- Provincial capital spending on infrastructure is set to rise, which the Business Council supports.