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ANALYSIS OF 2018 BC PROVINCIAL BUDGET

A.  Significant Tax Measures (non-housing)

  • Retained commitment to phase out PST on electricity by April 2019.
  • MSP premiums were halved on January 1, 2018 and will be eliminated by 2020. Before being halved MSP represented $2.264 billion in revenue.
  • Introduction of a new Employer Health Tax effective January 1, 2019.
  • 0% on payroll of less than $500,000
  • 0.98% on payroll of $750,000
  • 1.46% on payroll of up to $1,000,000
  • 1.76% on payroll of up to $1,250,000
  • 1.95% on payroll of $1,500,000 and over

This represents a significant increase on business taxation. This tax will generate revenue of approximately $1.85 billion in fiscal 2018/19. In comparison, the total estimated corporate income tax revenue for 2018/2019 is $4.096 billion.  Ontario, Manitoba, Quebec and Newfoundland already have similar employer health payroll taxes.

B.  Climate Action and Carbon Incentives

  • BC Carbon tax is estimated to generate $1.488 billion in fiscal 2018/19.  Rate in $/metric tonne on April 1 each year.
    • 2018 - $35
    • 2019 - $40
    • 2020 - $45
    • 2021 - $50
    • 2022 - $50
  • Under the new climate action program government plans to support industry in two ways
    • Industrial incentive to refund the carbon tax based on improvements to emissions profiles as compared to industry best.
    • Industrial Investment to provide investment to support transition to clean technology.

C.  Housing Plan

Significant measures in housing to decrease cost making it easier for potential employees to reside here.

  • Significant combination of measures announced to (1) implement new taxation measures, (2) close loopholes and crackdown on fraud (3) invest in new housing (4) encourage others to invest in new housing
  • New speculation tax will be .5% of assessed value of land for 2018 and 2% thereafter. It will apply to those who do not pay income tax in BC. Primary residences and long term rentals will be exempt and it is intended to catch satellite families.
  • Increase to the additional property transfer tax from 15% to 20%. 
  • Increase in property transfer tax on properties over $3 million from 3% to 5%.
  • 10 year investment of $6.18 billion over 10 years to build 33,700 units. Starts with $1.913 billion over next three years.
  • No apparent measures to stop the speculative investment from shifting to industrial land.

D.  Training and Education

  • The budget notes that a new Federal Provincial Labour Market Development Agreement and Workforce Development Agreements are being signed.  Between them they will add $1.32 billion training over the next three years. Between the two plans that is an incremental increase of $144 million over what the previous agreements would have provided.
  • Details on subsequent programs will not be available until agreements are finalized.
  • There is increased spending by the Ministry of Education of roughly $300 million but this does not seem to be program specific.

E.  Child Care Plan

  • Investment of over $1 billion in child care
  • New benefit of up to $1250 per month per child (for up to 86,000 families)
  • New fee reduction program lowers the cost of licensed care by $350 per month per child
  • 22,000 new child care spaces and investment in ECE Training.

F.  Economic Outlook

  • BC Real GDP growth was 3.4% in 2017, is expected to be 2.2% in 2018 and then hold at 2% for the following four years.
  • GDP Growth in our major client nations expected to be stagnant over next year.
  • Calendar year 2017 employment grew by 3.7%, unemployment averaged at 5.1%. Projections for the next few years have continued modest growth in employment (slightly over 1% per year)
  • Export growth was driven by energy, with overall growth of 13% in 2017. Manufacturing shipments increased by 7.7%.
  • Real exports of goods and services are estimated to have increased by 2.1% in 2017. Growth of 2.6% is expected in 2018 with a decline to 1.45% growth in 2019

G.  Budget Summary

Surplus and Debt

  • Forecasted surplus of $151 million for 2017/18 (even after accounting for the $1.26 billion loss at ICBC) with estimates of $219 million surplus for fiscal 2018/19 and just under $300 million for the subsequent two fiscal years. 
  • Tax-payer supported debt is projected to increase from $43.68 billion this year to $45.198 billion next year and be at $47.554 billion by the end of fiscal 2019/20.
  • This has the debt to GDP ratio holding steady at between 15.5% and 15.9% through 2021.

Revenue and Expenditures

  • Government revenue is estimated to grow from $52. 069 billion this fiscal to $54.193 billion by the end of fiscal 2019/20.
  • Largest expenditures by Ministry for 2018/19 will be health at $19.754 billion, Education at $6.341 billion, Social Development and Poverty Reduction at $3.364 billion, and Advanced Education, Skills and Training at $2.212 billion.
  • Largest revenue drivers are personal income tax of $9.836 billion, federal transfers of $8.93 billion, corporate income tax of $4.096 billion and Sales taxes of $7.428 billion.
  • Resource revenues total $2.413 billion.

 

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