B.C. commission calls for tax reforms

B.C. eyes $1.1 billion a year in tax cuts in an effort to spur lagging investment.

VICTORIA — British Columbia’s finance minister says the government will study recommendations that the province chop taxes to businesses by about $1.1 billion a year in an effort to spur lagging investment.

The expert panel’s report released Wednesday makes four recommendations, including exempting businesses from the seven-per-cent provincial sales tax on capital expenses for items like machinery and equipment.

The report, titled Improving B.C.’s Tax Competitiveness, also recommends exempting the PST on electricity costs and other energy, and suggested the province implement a made-in-B.C., value-added tax.

The value-added tax would address problems with the PST, including investment disincentives and an increase in business costs, the report says.

Finance Minister Mike De Jong said at a news conference Wednesday that the government will examine the report thoroughly.

However, a move towards a value-added tax shouldn’t be expected any time soon, because that recommendation would be a “significant shift” requiring extensive research and consultation, De Jong said.

“As the commissioners themselves point out, it would require a period of extensive consultation and discussion with British Columbians, so I wouldn’t hold your breath to see that recommendation acted on in the forthcoming budget,” he said.

The report was generated after a commission was established by the B.C. government in July to review B.C.’s corporate tax structure and consult with groups, businesses and individuals.

Commission spokesman Bev Dahlby said the proposed reforms are required to improve business investment in B.C., which is currently behind most other provinces.

Removing the provincial tax on capital investments for machinery and equipment would cost the province $640 million annually, while taking the PST off electricity and other energy costs amounts to $520 million a year.

But the report said those measures would be offset by increased investments from businesses and likely higher wages for workers, which increases income revenues for the province.

“The PST is a very complex tax that places a significant amount of burden on businesses, especially small businesses,” Dahlby said in the report.

He said during public meetings, many businesses said they would rather the province tackle PST reforms than reduce corporate taxes.

“One small business said the complexity of the PST means it acts like a tax on entrepreneurship.”

The report said the complexity of the PST creates a major burden on businesses, diverting effort from more productive and potentially growth-creating activities.

That feeling is nothing new, De Jong said.

“I think the commissioners have pointed out that the complexity of the existing PST system is something that frustrates people. We knew that,” he said.

The minister acknowledged that PST and capital investment are lingering areas of concern that need to be addressed, but said the province has a competitive tax structure in many other areas.

The report did not examine B.C.’s carbon tax or a return to the harmonized sales tax, which British Columbians turned down in a referendum more than five years ago.

The minister also noted that B.C.’s economy is still performing well.

“It continues to lead the country in terms of growth and job creation and we continue to be the envy of most jurisdictions, not just in Canada, but in North America,” De Jong said.

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