For Immediate Release
February 22, 2024
VICTORIA, B.C — On behalf of thousands of businesses across the Lower Mainland, the Greater Vancouver Board of Trade has issued a letter grade of C for the 2024-25 provincial budget.
Senior GVBOT staff travelled to Victoria for the provincial budget lockup, where they received an advance copy of the budget and assessed it on three criteria: Economic Vision; Fiscal Management; and Tax Competitiveness.
“Relief for small businesses was our number one ask and so we are pleased to see movement on the Employer Health Tax (EHT) threshold in the budget,” said Bridgitte Anderson, President and CEO of the Greater Vancouver Board of Trade.
The change is estimated to save businesses more than $100 million annually, and research has shown that the cost savings will flow directly to workers through higher wages. It is also positive that businesses will benefit from an additional one-time relief equivalent to 4.6 per cent of their electricity consumption. The budget estimates this will save businesses and consumers $370 million over the next year.
“While there is some relief for today, there is concern for tomorrow. B.C. has traditionally been a leader in Canada for growth, but we now find ourselves right near the back of the pack for growth this year and next. We are in an environment of low growth, high costs, stagnant incomes, and historic growth in our population. While there are welcome and needed public sector capital investments, we did not see similar action focused on attracting the next wave of private sector investment as other major projects complete,” noted Anderson.
“The fiscal track is getting a post-pandemic dose of reality,” said Anderson “with projected deficits totaling $22 billion over the next three years and a near 50 per cent increase in taxpayer supported debt-to-GDP ratio, the fiscal track of the government is certainly flashing yellow.” concluded Anderson.
2024 REPORT CARD RESULTS
Economic Vision: C
This year’s budget focuses on near-term relief for consumers alongside public sector investments in social services and public infrastructure. There were continued and new announcements to increase capital investments in transportation infrastructure, electrification, hospitals and schools. These investments create good jobs and are important building blocks for the social and economic fabric of the province. At the same time, there was an acknowledgment of slow and low growth and stagnant incomes.
Real GDP per capita is expected to decline between 2022 and 2028. We find ourselves at the back of the pack for growth this year and next. In an environment of low growth, high costs, stagnant incomes, and historic growth in our population there is a clear need for the Province to catalyze the private sector to invest in B.C. and create local jobs.
Some positive initiatives include:
- BC Electricity Affordability Credit that will help reduce electricity costs starting April 2024. Commercial and industrial customers will also benefit from reduced operating costs as they will also receive bill credits proportional to approximately 4.6 per cent of their electricity consumption.
- Budget 2024 establishes enabling tools to help support equity financing opportunities for First Nations. These tools include equity loan guarantees and potentially other supports that may be required for First Nations meaningful participation in projects, where there is shared interest and readiness with the Province. This has been supported by many Indigenous Nations and the GVBOT considers it a very welcome development in our province.
- Capital investments of self-supported commercial Crown agencies are projected to total $13.2 billion over the fiscal plan period. Self-supported investments mainly including $12.4 billion (94 per cent) of total self-supported capital spending is for electrical generation, transmission and distribution projects to meet growing customer demand and to enhance reliability.
- Budget 2024 adds to this investment with $24 million in new funding over three years to ensure adequate resources for regional and major mines permitting and support Mineral Tenure Act reform in collaboration with First Nations, and engaging with industry and communities.
The government has maintained a very action-oriented agenda to build housing and support affordability in the province. Progress on affordability will not be made overnight but it is clear that taken as a whole these investments are substantive and will benefit British Columbians. Housing availability and affordability are now key business issues and so we are pleased to see the ambition, focus, and action.
Fiscal Management: C-
Total debt is projected to significantly increase to $165 billion by the end of the fiscal plan. This represents an increase of 60% from 2023-24 to 2025-26. The vast majority of this debt is taxpayer-supported.
Expenses are expected to rise to $86.4 billion in 2026-27. This is an increase of $9 billion between 2023-24 and 2026-27.
Overall, the trajectory of taxpayer-supported debt-to-GDP is concerning. This is due to both slow economic growth and large increases in spending. The government has planned contingencies totaling more than $10.6 billion over the next three years.
While B.C. has been in an enviable position of a sustainable level of debt, and a AAA credit rating, this budget signals that B.C. ‘s fiscal advantage is shifting.
Tax Competitiveness: C
As noted, B.C. businesses received a win with a change to the Employer Health Tax threshold. The exemption is increasing from $500,000 to $1 million starting in the 2024 calendar year. Businesses with payrolls between $1 million and $1.5 million will continue to be partially exempt and will also see a decrease in tax obligations. The GVBOT has been advocating for an increase in the exemption threshold to $1.5 million and a graduated rate from between $1.5 million and $4.0 million. This budget makes progress but there is still work to be done.
At the same time, this budget maintains British Columbia’s ranking as the province with the highest marginal tax rates on non-residential investment in the country.
In addition, B.C. recently announced a new made-in-B.C. output-based pricing system (OBPS). While the creation of the OBPS responds to industry’s requests, the details are mixed, depending on industry. Overall, carbon tax revenue is forecast at $2.6 billion in 2024/25. The forecast is expected to rise an average of nearly 17 per cent annually over the next two years of the fiscal plan and is the fourth largest taxation revenue item for government.
Other tax measures include:
Tax Targeting Home Flipping Activity Introduced
Government will introduce legislation through a budget implementation bill in early spring 2024 to impose a new tax on proceeds from the sale of residential real estate in B.C. The tax will apply to income from the sale of property that was held for less than two years. The tax rate will be 20 per cent for properties sold within 365 days of purchase and will decline to zero between 366 and 730 days.
The tax will apply to income from the sale of properties with a housing unit and properties zoned for residential use. The tax will also apply to income from the assignment of contracts to purchase these properties. The tax will not apply to land or portions of land used for non-residential purposes.
The tax will apply to properties sold on or after January 1, 2025. Properties sold after the effective date will be subject to the tax if purchased within two years of the sale. The tax will apply even if the property was purchased before the effective date.
Property Transfer Tax Exemptions
The First Time Homebuyers’ Program will benefit first time homebuyers when they purchase a home worth up to $835,000, with the first $500,000 completely exempt from the property transfer tax. In addition, people purchasing newly constructed homes worth up to $1.1 million will also see lower costs through a new built home exemption.
Animation Productions Excluded from the Regional and Distant Location Tax Credits
Effective June 1, 2024, the regional and distant location tax credits are amended to exclude animation productions from eligibility. Per the budget, the change is meant to reflect a trend of animation companies using the credit to subsidize remote teleworkers, which is not the intended use of the credit.
Shipbuilding and Ship Repair Industry Tax Credit Extended
The shipbuilding and ship repair industry tax credit is extended for two years to the end of 2026.
The shipbuilding and ship repair industry tax credit supports a diverse workforce by providing an enhanced credit for apprentices with disabilities or who are First Nations. More than 10 per cent of apprentices hired by employers applying for the tax credit are First Nations.
Oil and Gas Exploration Expenses Excluded from the Mining Exploration Tax Credit
Effective February 23, 2024, oil and gas exploration expenditures will no longer qualify for the mining exploration tax credit. This amendment follows similar federal government changes to the mining flow-through share tax credit regime to exclude fossil fuel exploration expenditures from eligibility.
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About the Greater Vancouver Board of Trade:
Since its inception in 1887, the Greater Vancouver Board of Trade has been recognized as Pacific Canada’s leading business association, engaging members to positively impact public policy at all levels of government and to succeed and prosper in the global economy. With a Membership whose employees comprise one third of B.C.’s workforce, we are the largest business association between Victoria and Toronto. We leverage this collective strength, facilitating networking opportunities, and providing professional development through unique programs. In addition, we operate one of the largest events businesses in the country, providing a platform for national and international business and thought leaders to further enlighten B.C.’s business leaders.
Media contact:
Federico Cerani
Communications Manager
Greater Vancouver Board of Trade
604-640-5450 |
