A competitive environment is necessary to retain existing businesses and to attract new investment to the province. The GVBOT is concerned that recent legislative tax developments are placing B.C. at a competitive disadvantage. As highlighted in the GVBOT's 2016 Economic Scorecard, another significant regional challenge is the high marginal effective tax rate on capital investment. The region received a "C" grade, ranking behind both Toronto and Calgary, which received "A" grades. There must be a concerted effort to leverage our regions distinct advantages and to ensure that an environment is created in which market forces can drive growth, and build a better economy for all residents of British Columbia.
Recommendations
To ensure that our province is able to create a more competitive business environment, the Greater Vancouver Board of Trade recommends that the next Provincial Government:
- Create an investment tax exemption, or similar mechanism, to encourage machinery and other equipment acquisitions;
- Investigate improvements to the PST that will lower the Marginal Effective Tax Rate; and
- Work with local governments and the business community to develop a coordinated and region-specific strategy for the Lower Mainland that leverages our unique clusters and advantages.
Where they stand
PST Reform
- While the released portions of the BC Green Party platform make no mention of changes to the Provincial Sales Tax, the "strategy for a new economy" portion of their platform promises to develop a tax system that is progressive, neutral, and promotes investment, financing, and innovation.
Greater Vancouver Economic Strategy
- Recently, the BC Greens unveiled their "strategy for a new economy" which focuses on the tech sector. Their strategy includes an Emerging Economy Task Force which is mandated to create an economic and regulatory environment that leverages technological change and disruption to grow the economy and "mitigate their various social and economic impacts." They also commit to modernising labour laws to reflect what they believe to be the changing nature of work.
- The BC Greens have proposed the creation of an Innovation Commission to promote business development in the technology sector and appoint an Innovation Commissioner to serve as an "advocate and ambassador" for the B.C. tech sector in Ottawa and abroad.
- They commit to investing $20 million per year to promote entrepreneurship, leadership, and business skills development at post secondary institutions; $70 million over four years to help start-ups "leverage their funding;" $50 million a year to support incubators, accelerators, and affordable spaces for SMEs; and an investment of $35 million per year over four years to help "create, grow and attract companies."
- Their platform provides supports for the green tech sector. This includes $120 million over four years to promote research and development as well as regulatory changes and $20 million per year to support the adoption and procurement of green technologies.
Carbon Tax
- The BC Green Party's climate change strategy plans to increase the carbon tax by $10 per year for four years and extends the tax to include fugitive and vented emissions. In four years, this would place the B.C. carbon tax at $70 per tonne. They will also change the Greenhouse Gas Reduction Targets act to create an interim target of 40% reduction below 2007 levels by 2030. Currently the act legislates 33% 2007 levels by 2020 and 80% below 2007 levels by 2050.
Our Analysis
It is positive to see that the BC Greens have included a review of the tax system to ensure that it is conducive to economic growth. While the goals of the review are positive, we would have like to see greater details on the type of changes they believe would help promote investment and innovation.
In the Greater Vancouver Economic Scorecard 2016, the "information economy" was identified as one of the key clusters in our region. The BC Greens should be commended for their forward looking approach to both the positives, and potential negatives of technological disruption. While they have listed several investments in the sector the goals of these programs remain vague beyond generalities such as "create, grow, and attract companies."
As a small, open economy, competing with jurisdictions both across Canada and around the world, the BC Green Party's carbon tax policies are worrying. While their platform makes mention of revenue neutrality, in the past the BC Greens have alluded to a carbon levy to fund transit development. Climate change is an important issue to the long-term health of our community and the world, however policies in our relatively small jurisdiction which are not aligned with the realities in other Canadian provinces and the United States put us at a competitive disadvantage. We risk harming our own economic position while making only small differences to the global levels of green house gas emissions.
PST Reform
- In their 2017 Platform, the BC Liberals commit to phasing out PST on electricity for businesses.
Greater Vancouver Economic Strategy
- The BC Liberal platform promises to support the technology sector by providing additional $87 million toward their BC Tech Strategy; pursuing $950 million in federal funding under the technology clusters initiative; and increasing the Small Business Venture Capital Tax Credit from $35 million to $38.5 million per year. They have also committed to expanding the Interactive Digital Media Tax Credit to cover commercial applications for Augmented and Virtual Reality.
- Right before the release of their platform, the BC Liberals announced the Robson Square tech strategy, and reaffirmed this commitment in their platform. In coordination with the University of British Columbia, the strategy is meant to make Robson Square an innovation hub and makes investments in UBC's engineering, computer science, and life science programs to increase graduates by 250 per year.
- The BC Liberals have also committed to expanding programs to help B.C. tech companies access new markets as well as changing government procurement processes so that government becomes an early purchaser of B.C. technology.
Carbon Tax
- The BC Liberals have recommitted to the revenue neutrality of the current carbon tax model.
- They want to maintain the current carbon tax rate until 2021, until other provinces match the $30 per tonne rate in B.C.
Our Analysis
The phase out of the PST on electricity is an important step in ensuring the tax code does not impeded the economic competitiveness of our province. This is especially good news for rural communities and industries such as forestry, pulp and paper, and mining.
BC Tech Strategy has been a signature policy of the BC Liberal government, focused on the province's tech and innovation sectors which, as mentioned before, is an important cluster in our region. They also making some references to tourism which is another well positioned sector in Greater Vancouver. We are pleased to see a focus on coordinating efforts to tap into federal funding for the technology sector, as well as an expansion of the successful Small Business Venture Capital Tax Credit program. Although it would have been better to see a commitment to a full update of the tax credit to ensure it is still well positioned to meet the needs of the sector and does not impose too high of an administrative barrier.
We believe the BC Liberal policies on GHG emissions are in line with the stated positions of the GVBOT, especially their recommitment to revenue neutrality. Their strategy to not raise the price of carbon until the rest of Canada catches up will be vital to our competitive positioning.
PST Reform
- In their 2017 Platform, the BC NDP have committed to removing PST from electricity used in mining sector.
Greater Vancouver Economic Strategy
- The BC NDP platform makes multiple announcements to support the tech sector. Their strategy focuses on building tech infrastructure, particularly in the North and Interior; developing and attracting talent; and strengthening he venture capital ecosystem.
- They would encourage the use of B.C. software firms for major government projects.
- To develop the necessary talent in the tech space, the BC NDP plans to invest $50 million over two years to create a new graduate scholarship fund, invest $100 million to expand technology-related post-secondary programs, and appoint a Chief Talent Officer to focus "government's efforts to train, repatriate and recruit the talent necessary for our tech sector…"
- The BC NDP promise to strengthen and simplify existing venture capital and investment tax credit programs.
- The BC NDP platform identifies tourism as a major job creator and the role of B.C.'s beer and wine industry plays in its growth.
- They have also committed to increasing the corporate tax rate by 1 point to raise 250 million in revenue every year.
Carbon Tax
- The BC NDP platform states that all new money from carbon tax increases, in line with the federal mandate, will be used to provide rebate cheques for families, and to investing in climate change solutions.
Our Analysis
It remains unclear whether a BC NDP government would keep the PST tax exemptions for all businesses proposed by the current government or whether they would only exempt the mining sector.
Just as the other two parties have, of the important clusters in the Greater Vancouver region, the BC NDP has focused on the tech sector. They have rightly taken the approach of providing supports for sector infrastructure, human capital, and capital investment. Their idea of a Chief Talent Officer is intriguing because some B.C.'s best talent and their ideas often leave our province for larger tech hubs like Seattle and Silicon Valley. We also are very keen on their idea to simplify the existing venture capital and investment tax programs as there are many existing supports for start-ups and high growth SMEs, and its vital that they are accessible.
They also make mention of the beer and wine industry and the important role it plays in our tourism sector, but offer little details on a strategy to better link them together.
While the NDP has signalled that they will only raise the price of carbon once mandated to by the federal government, the platform is unclear as to whether the current revenue neutrality of the carbon tax will be maintained. They have committed to both rebates as well as investments with the carbon tax revenue. Therefore, it is unclear whether a BC NDP government would use future carbon tax increases as a net revenue generator for government, or whether an NDP government would follow the current system of returning to taxpayers the collected revenue in the form of tax savings for individuals and businesses. Compounded with increasing the cooperate tax rate, losing revenue neutrality is a competitive disadvantage for B.C.'s businesses including energy intensive trade exposed sectors.
* While the carbon tax was not an issue specifically touched on in our 2017 Provincial Platform, it has emerged as an important election issue. We will provide commentary on this topic inline with our previous statements and position including those found in our Provincial Pre-Budget Submissions.