B.C. remains one of North America's most attractive regions for starting a business.
According to a global study by PwC, the World Bank and the International Finance Corp. (IFC), Canada ranked eighth out of 185 countries for tax system simplicity and lowest business tax burden.
That ranking is up from 11th last year and 28th in 2009.
"We're sitting in the [top] 10%," said Lincoln Schreiner, partner at PwC's Vancouver office, "which is tremendous."
The study compared the total tax rates an average small business with 50 employees would pay in each country, the time it took to compile returns and submit tax payments and the number of payments a company would have to make in a year.
According to the study, the model SME in Canada – based in Ontario – had to make eight tax payments and spend an average of 131 hours a year to compile its tax returns and submit its payments. That compares with a global average of more than 27 payments and 267 hours to compile returns and pay income, payroll, property, sales and other taxes.
But Schreiner noted that B.C. companies face an even better situation than the national average by generally having lower total tax rates.
"B.C. is better than the average for profit taxes than Ontario and payroll taxes should be better here than in Ontario, because they have an employer health levy and we do not," he said.
"If people want to start a business and create jobs, what this is suggesting is it's a feel-good message that the government is trying to support you by reducing red tape and reducing the cash burden on your profits."
Federal government cuts to corporate tax rates have made Canada North America's lowest corporate tax jurisdiction.
Since 2009, federal corporate tax rates have fallen to 15% in 2012 from 19% in 2009. B.C.'s corporate tax rate has dropped to 10% in 2011 from 11% in 2008.
Canada's total business tax rate now sits at 26.9%, compared with the North American average of 42%. The top income tax rates for an average SME were much higher in the U.S. and Mexico, at 27.6% in the U.S. and 24.6% in Mexico.
B.C.'s standings, however, are likely to dip next year following the return of the PST and GST. The return of the two taxes will add to the administrative burden for companies that was improved under the single HST system.
Despite B.C.'s tax advantages, the province continues to face an exodus of entrepreneurs leaving to join hubs of talent and expertise elsewhere.
"We have a lot of very bright young people who have left B.C. and gone to California to work in the tech industry, for example, and they're dying to get back to B.C.," said Schreiner. "But this is good news to say, if they want to come here and create their business, the tax environment is going to be very supportive." •
