Tax increases in British Columbia could threaten the future of business growth and investment. That’s
according to a report from the Business Council of British Columbia (BCBC), an industry group representing some of the biggest firms in the province.

We decided to take a closer look at BCBC’s warning, and also ask an Okanagan expert his view of the changes. The report, which was first published in the summer, explains that BC could end up losing its competitive edge because of a cumulative surge in taxes.

It highlights three main changes: The elimination of the HST (harmonized sales tax) and returns to the PST (provincial sales tax)/GST
(goods and services tax) model. BCBC says firms are paying about $3 billion in sales tax on business inputs where previously, under HST, they would pay nothing The Employer Health Tax. BCBC says the levy is a “large tax hit” that could have an overall impact of about $800 million on businesses.

An increase in corporation tax. A two-point rise (from 10% in 2013 to 12% today) adds $700 million to income tax paid by firms, BCBC says The report also mentions changes to labour laws and regulations that are adding to costs. Among those are a minimum wage that has grown considerably in recent years alongside changes to the BC Labour Code and Employment Standards Act and environmental regulations.

“Taken holistically, the cumulative impact of higher taxes and mounting regulatory costs is weighing on investment and business sentiment in BC,” the report concludes. “We are concerned that over time companies will become more tentative about investing in BC and deploy capital in other jurisdictions.”

The bottom line? Businesses are paying close to $5 billion more in tax now than they were in 2013, BCBC says. But why is the BCBC so upset about these increases? Shouldn’t all firms pay their share to help keep the province happy and healthy?

The primary worry, the report contends, is that the province could potentially start seriously losing out on investment.

That’s because, while taxes on businesses have grown in BC, they have fallen in nearby jurisdictions.
BC’s “relative competitive position,” therefore, has been lost as corporate and personal income tax rates have been slashed in the US.

In Alberta, too, a commitment has been made to cut corporate income tax rates from 12% to 8% by 2022.
“Relatively high” income tax rates on “skilled workers, experienced managers and entrepreneurs” are also causing problems, the report adds, especially as competitors step up their efforts to bring in top talent.

“The risk is that the province will chase new capital away and deter some companies from expanding their BC operations,” the report explains. “Policymakers need to be more sensitive to the impact of provincial tax and regulatory policies on business.

“They should understand that without new investment and a desire by companies to expand, fewer jobs will be created, some existing jobs will be in jeopardy, and overall economic growth in the province will suffer.”

Locally, the combination of these factors might already be having an effect. Dan Rogers, the executive director of the Kelowna Chamber of Commerce, says businesses in the area are concerned about “cumulative increases” in tax. “It’s impacting everybody across the board,” Rogers explains.

He mentions Tolko, which permanently closed his Kelowna lumber mill in early November and announced a shutdown across BC over Christmas. 

"It's not just a supply issue," Rogers says. "Overall costs are rising. Layers of taxation are having an impact." He also mentioned increasing property tax increases – a municipal prerogative – as another burden that can weigh down a business. 

The report, too, addresses property taxes, explaining that in 2018 they increased by 22% on 2013 levels. 

Rogers says the Chambers of Commerce across the province are "trying to get the government's attention" about the threats faced by businesses. There should be a "total review of the tax code," he says. 

This is especially important for owners of small businesses, he adds, who are less able to deal with increases than larger firms. "If we don't get a hold on it, it could be really serious," Rogers says. But how serious could it get? 

"Investors might look at other places to move their capital," he says. "If you don't remain competitive and investors can go elsewhere and do better, they will. "Look at what's happening in Alberta."

The US is "generally more competitive" than BC, Rogers adds, and international competitors are constantly challenging for investment. 

And if investment proves had to come by and taxes continue to increase, everybody suffers. he says. 

"It means less funds available," he explains. "That means less money for staff. Less money for everything."