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RELEASE: Business Council Welcomes Budget Surplus and Commitment to Tax System Review
Victoria, BC - February 16, 2016 – The Business Council welcomes today’s provincial budget and supports the government’s plan to generate modest operating surpluses over the next three years. The Council also applauds the government’s announcement that it will launch a Commission on Tax Competitiveness with a view to strengthening the tax base and improving competiveness for business operating and investing in British Columbia.
The Business Council notes that the 2016 budget outlines a sound fiscal plan for the province during a period of healthy, but uncertain, economic growth. The government is aiming to post another three years of operating surpluses and has pledged to gradually reduce the province’s net debt measured relative to the size of the economy (GDP). Importantly, given the risk-prone external setting, Budget 2016 is built around cautious and realistic economic and revenue growth projections while still allocating additional spending to social programs and other high priority areas.
“We endorse today’s provincial budget and compliment the government on its careful management of the province’s finances,” said Greg D’Avignon, President and Chief Executive Officer of the Business Council. “We are especially pleased with the planned review of the B.C. tax system as part of an effort to improve the province’s competitiveness over time.”
In recent years, the Business Council has advocated for policies to strengthen B.C.’s competitive position in the wake of the damage that’s been done by restoring the retail sales tax, steadily rising government-imposed levies and fees, higher electricity prices, and escalating energy taxes. The return to the Provincial Sales Tax in 2013 has added $1.5 billion in capital and other production costs onto businesses across B.C. and increased tax compliance costs. Refining current tax policies can help to make B.C. a more attractive location for business investment, particularly in the tradable industry clusters that strongly underpin our long-term prosperity.
“Without steps to comprehensively modernize the tax system, British Columbia risks losing out on the capital investments and jobs needed to build and sustain an innovative, globally competitive economy,” stated D’Avignon.
The Business Council agrees with the government’s assessment that our economy is on a relatively stable growth path. Despite the current unsettled global backdrop, a weak Canadian economy, and low commodity prices, B.C. is likely to put in a respectable growth performance this year. A diverse economy supported by boosts from the low Canadian dollar, an expanding U.S. economy, and an increasing population should put B.C. near the top of the provincial growth rankings in 2016 and 2017. The Business Council expects the provincial economy to expand by 2.8% (after inflation) this year, which is somewhat stronger than the 2.4% figure assumed in Budget 2016.
“With the return to the PST, the highest carbon tax in North America, higher MSP premiums, a complex and costly regulatory environment (especially for land-based and infrastructure industries), and in some municipalities an unfair property tax burden, B.C. businesses are challenged by escalating costs,” said Ken Peacock, the Business Council’s Chief Economist. “While there is little in today’s budget to address mounting cost pressures for business, the good news is that a solid fiscal framework and relatively positive economic outlook in 2016-17 have created a foundation to enable the province to take action to bolster B.C.’s competitive positon over time.”
The Council is also pleased to see additional capital spending in fiscal 2016-17. From the Council’s perspective, today’s low-interest rate environment makes it an opportune time to invest in schools, post-secondary, transportation and other infrastructure assets that improve our productivity.
Visit www.BCBC.com in the coming days for the Business Council’s full analysis of Budget 2016.
The Business Council of British Columbia, now in its 50th year as the premier business organization in British Columbia, is a non-partisan organization made up of 250 leading companies, post-secondary institutions and organizations from across BC’s diverse economy which support hundreds of thousands of jobs across the province. The Council provides timely and exceptional public-policy research and advice on issues to enhance BC’s competitiveness and prosperity.
Cheryl Maitland Muir