BC Business Matters:
Jock Finlayson >>
Where Does the Money Come From? The B.C. Government’s Top Revenue Sources
According to the 2018 B.C. budget, this year the provincial government will spend almost $54 billion. This figure includes the cost of government itself, as well as provincial funding allocated to help pay for health care, education, and social services. Next year (2019-20), spending is slated to jump to $56.8 billion. To put this in context, the entire B.C. economy generates annual economic activity totaling some $290 billion. So, provincial government outlays amount to a bit less than one-fifth of the economy.
Where exactly does the province get the vast sums required to pay for the services and programs it provides or supports?
At a high level, the province’s revenues can be divided into two buckets. The first consists of “taxation revenues” that come from various taxes paid by individuals and businesses. The second is “non-taxation revenues.” These are made up of cash transfers to B.C. from the federal government, the net earnings of provincial Crown Corporations, natural resource royalties, and wide array of fees and levies. The accompanying pie chart shows the mix of “taxation” and “non-taxation” revenues in 2018-19.
Looking more closely at the revenue side of the government’s budget, the bar chart below depicts the province’s main sources of revenue in 2018-19.
Personal income tax is the biggest source of cash, supplying some 18% of the government’s revenue in the current fiscal year. Next is transfers from the federal government (16.5%), followed by sales tax (almost 14%), corporate income tax (7.6%), and “other fees and licenses” (7.4%). The latter category is a grab-bag that includes fees charged for health care services, post-secondary education, and the use and ownership of motor vehicles. Added together, the top five revenue sources provide 63% of the funds collected by the B.C. government.
A few other aspects of the province’s revenue picture are worth highlighting.
First, direct natural resource revenues ($2.4 billion in 2018-19) are a comparatively small contributor. However, it should be noted that many other revenue streams – e.g., personal income tax, business income tax, property tax, and fuel and carbon taxes – are also bolstered by the activities of B.C.’s natural resource industries.
Second, once the new Employers’ Health Tax (EHT) is in place (2019-20), the province will begin reaping almost $2 billion annually from this source. Some of this will be offset by the elimination of Medical Services Plan (MSP) premiums, a portion of which is paid by employers. However, in net terms, the EHT will produce more revenues for the government than MSP premiums.
Third, B.C. is a jurisdiction known for having steep fuel and carbon taxes. Together, fuel and carbon taxes are on track to put almost $2.5 billion into the government’s coffers in 2018-19. And as the carbon tax continues to be pushed higher under B.C.’s climate policy, the revenues garnered from these sources will rise to almost $3 billion by 2020-21.
 Nominal gross domestic product.