On September 11, 2017, Minister of Finance Carole James announced British Columbia’s updated 2017 budget. While the previous Liberal government had tabled its budget on February 21, 2017, it never received royal assent. The political landscape in British Columbia changed drastically on July 18, 2017, when the New Democratic Party (NDP) formed the provincial government, with the backing of the Green Party, three months after the May 9 election resulted in a parliament in which no party has enough seats to form a majority government. British Columbia law requires that budgets be enacted within 90 days after a new government has been formed. The budget update forecasts a surplus of $246 million in 2017-18, which is lower than the $295 million forecasted in February.
“Building a Better B.C.” proposes modest income tax changes, including a new personal income tax rate of 16.8 percent for taxable earnings over $150,000, as well as a general corporate income tax rate increase of 1 percent, and a 0.5 percent decrease in the small business corporate income tax rate.
The revised budget contained two new commodity tax changes and confirmed a few measures previously announced in February.
New Commodity Tax Measures
Carbon Tax
Effective April 1, 2018, the carbon tax will increase by $5 per tonne of carbon dioxide (CO2) equivalent emissions to $35 per tonne. In addition, the carbon tax will increase by $5 each year until April 1, 2021, at which point it will be $50 per tonne of CO2 equivalent emissions.
In addition, Part 2 of the Carbon Tax Act will be repealed. This provision required the government to prepare an annual “Carbon Tax Report and Plan” in order to help ensure that the carbon tax remained revenue-neutral. The new government has suggested that removing this provision will allow it to spend carbon tax revenues on various measures to help reduce emissions.
Previously Announced Commodity Tax Measures
Sales tax measures announced in the previous budget were also included in the September budget update. However, while the previous budget had proposed an October 1, 2017 effective date for many of these changes, several of them currently do not have a scheduled effective date. Further information on when these measures will be enacted is to be provided at a later date.
Phase Out of PST on Electricity
In an effort to cut costs and improve competitiveness for businesses located in British Columbia, the budget proposes to phase out the PST on taxable electricity. The tax rate on electricity will be reduced to 3.5 percent from 7 percent, effective on a date to be determined by regulation, with electricity becoming fully exempt from PST on April 1, 2019. Note that electricity for residential use is already exempt from PST.
Carbon and Motor Fuel Tax Measures
The 3 cent per litre tax on locomotive fuel will be eliminated for natural gas used in internal-combustion engines for any vehicles or rolling stock which run on rails, effective as of a date to be enacted by regulation. This exemption is consistent with other motor fuel tax exemptions available for natural gas used in ships and motor vehicles.
Tobacco Tax Measures
The new government has retained the planned tobacco tax rate increases, to take effect on a date to be determined by regulation. As a result, the tobacco tax rate per carton of 200 cigarettes will increase to $49.40 from $47.80, and the tax rate for fine-cut tobacco will rise to 24.7 cents from 23.9 cents per gram.
More Information
Further information on British Columbia’s 2017 budget update may be found on the province’s website at: http://www.bcbudget.gov.bc.ca/2017_Sept_Update/default.htm