Despite some targeted spending and tax incentives in support of sectors like clean energy and life sciences, a number of business associations lamented last week’s provincial budget as yet another missed opportunity to address the high cost of doing business in B.C.
“The budget provides significant resources to support inclusive and clean growth as outlined in the government’s economic plan of last week,” Fiona Famulak, president of the BC Chamber of Commerce, said last week in response to the budget. “Such investments are important investments. However, [the] budget does not take any significant strides to enhance the competitiveness of B.C. businesses.”
“Today’s B.C. budget did not commit to a review of B.C.’s tax system, which is long overdue,” said Surrey Board of Trade CEO Anita Huberman.
“B.C. has weathered the pandemic relatively well given its strong fiscal position, a return of economic activity and pre-pandemic employment levels," said Bridgitte Anderson, president of the Greater Vancouver Board of Trade. "However, given years of cumulative tax increases, the cost of doing business in B.C. is high. Budget 2022 has limited incentives to drive economic growth and competitiveness.
“Spending is up significantly over the next three years and nearly $5 billion is set aside in contingency funds. Last week, the B.C. Government unveiled its economic plan, StrongerBC. Today’s budget lacks financial details to support many of the announced initiatives and does not address needed tax and regulatory reform, especially for our small and medium businesses."
Last week’s budget provided $25 million in support for B.C.’s tourism sector, which is still struggling to recover from two years of pandemic-related travel restrictions and mandates.
It also provides some targeted funding or policy support for life sciences and clean energy, and funding for more skills and trades training – something many sectors will welcome.
The budget provides $1 billion in new funding for CleanBC, including $310 million for decarbonizing industry. Life sciences is getting a boost in the form of $195 million in funding to research groups like GenomeBC and the Michael Smith Health Research BC.
“Since its inception in 2000, GenomeBC has generated over $1.2 billion of investments in more than 450 B.C.-based research and innovation projects, brought more than $900 million in funding to B.C. researchers and created over 32,000 jobs in the province,” budget 2022 notes.
In the clean-energy sector, Finance Minister Selina Robinson, in her budget address last week, singled out Hydra Energy – a B.C. company focused on supplying hydrogen to heavy-duty trucks to blend in diesel engines – as one beneficiary of the exemption of hydrogen fuel from the Motor Fuel Tax.
“This will benefit companies like B.C.-based Hydra Energy, as it works to transition heavy-duty vehicles to hydrogen power,” Robinson said.
Stewart Muir, executive director of Resource Works, said he applauded those kinds of policy supports, but echoed concerns of groups like the Mining Association of BC (MABC), the BC Chamber of Commerce and the Greater Vancouver Board of Trade (GVBOT) that the budget does not address fundamental obstacles to doing business in B.C.
Those obstacles include a comparatively high corporate tax rate, a carbon tax that provides no protection for energy-intensive trade exposed industries such as mining and the new employer health tax, which shifted more than $2 billion in costs for health care from B.C. residents, who previously paid the MSP health care premium, to employers.
“B.C.’s corporate tax rate is 12%,” Muir said. “Our next-door neighbour in Alberta is 8%. That is an incentive for businesses to go and enjoy lower corporate taxes in Alberta. Also, in Alberta, they have no payroll tax … like we do in B.C. Nor does Saskatchewan have that.
“We have the highest fuel taxes in Western Canada. We have a seven-per-cent sales tax, and Alberta has no sales tax. You stack those things up [and] there’s a very powerful incentive to locate a new business or move an existing business to Alberta.”
One of the few tax hikes in the budget is one that comes every year – a $5 per tonne bump to the carbon tax. On April 1, the carbon tax will rise to $50 per tonne. B.C.’s mining sector is particularly disadvantaged by the tax, because it competes with so many mining jurisdictions that have no carbon pricing.
“B.C. has among the highest carbon taxes in the world,” the MABC said in response to the budget. “Yet B.C. is the only jurisdiction in the world that does not provide meaningful carbon pricing protection for its mining sector.”
As for B.C.’s natural resources sector overall, the budget forecasts a boost to B.C.’s economic growth from the nascent liquefied natural gas (LNG) industry in 2025 and 2026, when B.C.’s first major LNG project – LNG Canada – is expected to begin exporting.
But it forecasts a significant decline in revenue from B.C.’s forestry sector, and some of the revenue losses will be self-inflicted. Budget 2022 projects forestry revenue to fall from $1.8 billion in the 2021-22 fiscal year to $887 million in 2023-24.
That $1 billion decline is largely attributed to the expectation of lower lumber prices and stumpage rates. But the removal of a significant amount of timber from the annual allowable cut through moratoria placed on old-growth stands is also expected to reduce forestry revenue.
The budget provides $185 million over three years to help forestry workers and communities cope with the many job losses expected as a result of the province’s old-growth deferrals.
“That’s cold comfort that they found ways to make people redundant from their jobs and cushion their exit from the workforce,” Muir said. “That’s not a building mentality – that’s something else.”
The budget provides funding for a new secretariat that will oversee the harmonization of B.C. laws with the Declaration on the Rights of Indigenous Peoples Act (DRIPA) and $44 million for the creation of a Ministry of Land, Water and Resource Stewardship, which will assume some of the land-use planning responsibilities of other ministries, like Agriculture, and Forests, Lands and Resource Operations.
A central role for the new ministry appears to be Indigenous reconciliation, as it pertains to land and resource use. Muir fears the creation of a new ministry may add additional layers of bureaucracy for resource industries.
“It sounds like it’s going in the direction of making things more complicated for people who are operating on the land or in the water in British Columbia,” Muir said.
One area the province is investing in that will benefit a number of sectors is skills and trades training. Almost all sectors of the economy are experiencing a skilled-worker shortage.
The budget allocates $21 million to the Industry Training Authority – a bump that the BC Building Trades welcomed as long overdue. The funding will provide the ITA with additional apprenticeship advisers and more resources for “upskilling” initiatives.
“This funding is an important step in providing trainers the tools they need to assist the province’s thousands of apprentices,” said BC Building Trades executive director Brynn Bourke. •
