On February 19, 2013, Finance Minister Michael de Jong announced British Columbia's 2013 budget. In keeping its promise to achieve a balanced budget, no goodies were presented by the province in this year's budget. The Minister defended this decision by drawing attention to the fiscal responsibility of not spending beyond the province's needs.
With a provincial election looming later this year, only a few significant tax changes were introduced. However, the government also took the opportunity to comment on the status of the province's impending return to a Provincial Sales Tax ("PST").
Commodity Tax Measures
Return to PST
While no new details were provided on the reintroduction of the PST and elimination of the HST, effective April 1, 2013, the budget documents provide commentary on some of the tools and services that have been made available to assist businesses in preparing for the upcoming change. In addition, the province chose to highlight some previously released information on the transitional measures for new housing, which are designed to ensure that purchasers are treated equitably under either provincial sales tax system, as part of this year's budget.
Unfortunately, the budget announcement was relatively quiet on any potential timing for the release of the regulations to the Provincial Sales Tax Act, which should confirm that the new PST will indeed function in a manner very similar to the former Social Service Tax. Interestingly, the budget points out that, at the present time, the re-implementation of the PST remains subject to the approval of the Legislature.
As announced in the 2012 budget, the government has reviewed the carbon tax and its impact on British Columbia residents. The review covered all aspects of the tax, including revenue neutrality, and its impact on the province's competitiveness, particularly in the agricultural sector.
After reviewing its findings on the economic impact of the carbon tax, the government announced that carbon tax rates will remain the same (at $30 per tonne of carbon dioxide equivalent emissions) and the carbon tax base will not be expanded.
The province also announced that a carbon tax relief grant for commercial greenhouse vegetable and floriculture growers will be available for 2013 and future years. The grant is equal to 80% of the carbon tax paid on specified fuels, and the eligibility criteria will be consistent with those used for the temporary carbon tax relief for these same industries in 2012. In addition, the government has announced its intention to introduce legislation this fall that will provide a carbon tax exemption for farmers. The exemption will apply to coloured motor fuel that currently qualifies for exemption from motor fuel tax.
As required under the Carbon Tax Act, the government also reported that it achieved revenue-neutrality in respect of the carbon tax for 2011/2012. Based on figures from Public Accounts, personal and business tax revenue reduction measures exceeded the carbon tax collected by $182 million. In addition, the revised forecast for 2012/2013 will repeat the resulting excess to the tune of $203 million.
As announced in the 2012 budget, the province intends to adjust tobacco tax rates to keep the overall tax on tobacco products constant, despite the change from HST to GST and PST. Consequently, effective April 1, 2013, the tax rate on cigarettes will increase from $37.00 to $42.60 per carton. Similarly, the tax rate on loose or fine-cut tobacco will increase from 18.5 cents to 21.3 cents per gram, and the tax rate on cigars will increase from 77 per cent to 90.5 per cent of the sale price, with the maximum applicable tax rising from $6 to $7 per cigar.
To help discourage the use of tobacco products as part of the province's "Tobacco Control Strategy", the budget also provides for further tobacco tax increases of $2 per carton to $44.60 for cigarettes and 1 cent per gram to 22.3 cents for loose or fine-cut tobacco, effective October 1, 2013.
Income Tax Measures
The 2012 budget proposed a temporary 1 per cent increase in the general corporate tax rate to 11 per cent, effective April 1, 2014. British Columbia has re-evaluated the need for this rate increase and has decided to advance the effective date to April 1, 2013.
In addition, this budget proposes to create a new personal income tax bracket for the 2014 and 2015 taxation years. Under this proposal, individuals earning income exceeding $150,000 will have income tax applied at a rate of 16.8 per cent, an increase of 2.1 per cent from the previous maximum tax rate of 14.7 per cent. This temporary tax rate increase will be eliminated on December 31, 2015.
Further information on British Columbia's 2013 budget may be found on the province's web site at:
2013 British Columbia Budget