Reinvest in B.C. by making carbon tax revenue neutral again

Businesses and British Columbians alike are facing headwinds not seen in a generation.

Higher interest rates, persistent inflation and a slowing economy put upward pressure on the cost of goods, borrowing and virtually every other expense associated with owning and operating a business.

Meanwhile, economic indicators suggest a downturn as early as 2024, and unfortunately, many are already feeling the pinch.

The well-being of people and local businesses is intricately intertwined, each relying on the other to establish an affordable environment conducive to unlocking their full potential. It's a virtuous cycle in which a thriving local economy attracts increased investments, empowering businesses to create more well-paying jobs, thereby enabling British Columbians to channel their abilities to bettering their communities and contributing to growing our local economy.

This is why it's paramount that heading into the new year that all levels of government work with the private sector to create a competitive and attractive business climate that fosters productivity, innovation and entrepreneurship while addressing the affordability hurdles facing so many British Columbians and businesses.

How do they do this?

Our report — Counting the Costs: Assessing Economic Challenges for Businesses in British Columbia — offers comprehensive first steps.

Our report found that between 2022 and '24, the provincial government will saddle B.C. businesses with an additional $6.5 billion in direct costs — only compounding the effects of the affordability crisis. The largest of these costs encompass increases to a new payroll tax, carbon tax and corporate income tax.

Small businesses employ 1.1 million British Columbians and make up 33 per cent of the provincial GDP. Worryingly, over half expect a decrease in profitability over the next three months. Despite record population growth, our provincial economy is expected to underperform most other provinces and our southern neighbours.

To alleviate these pressures, we recommend increasing the payroll tax threshold for small and mid-size enterprises, introducing PST exemptions on business inputs like software and equipment to help drive innovation investment, going back to a revenue-neutral carbon tax that reinvests back into local technology and businesses, and actively seeking opportunities to reduce costs for businesses, especially small- and mid-size ones.

We must continue to lower emissions, but we can't do it by shifting those emissions to other jurisdictions.

Every dollar saved is a dollar that local businesses can inject back into the local economy. For businesses operating on razor-thin margins, this relief can be a game-changer, enabling growth, expansion and the ability to weather economic headwinds.

Increasing the payroll tax threshold can ensure that local businesses aren't taxed when they seek to increase their payroll, raise wages or hire more staff. Reducing the cost of technology and equipment fosters innovation. Adjusting the PST on technology would stimulate provincewide economic growth, and help businesses adopt technology.

When introduced in the early 2000s, the carbon tax was revenue-neutral for businesses. Fast forward to 2023-24 and we expect the business share of carbon tax revenues will near $1 billion and continue climbing. According to estimates, the carbon tax has been a net tax to business of nearly $2 billion in just three years.

Instead of imposing a tax on businesses that risks driving investment out of the province, we believe that the tax should return to its original purpose — driving clean investment in our economy, while protecting industries that sell on the international market.

By recycling the revenues back into local, made-in-B.C. technology and emissions reduction efforts, we can ensure that B.C.'s business sector is primed to propel us toward a sustainable and prosperous future.

Entrepreneurs are optimistic by nature, and they'll often find a way through to achieve their goals. In today's conditions it needs to be a priority for all levels of government to ensure our economy works for people and remains an attractive place to invest and grow a business.

Together, we can build a province that isn't just ready to face the future, but is also equipped to shape it.