2011 British Columbia Budget Report
February 15, 2011
Highlights
- Deficit of $1.265 Billion Forecast for 2010-11
- Deficit of $925 Million Forecast for 2011-12
- Balanced Budget by 2013-14
Overview
“A Strong, Stable Foundation for BC's Future"
On February 15, 2011, the Honourable Colin Hansen delivered his fifth budget as Minister of Finance.
With a change in leadership coming in the next two weeks and the looming harmonized sales tax (HST) referendum later this year, this budget is very much about maintaining the status quo and allowing the incoming Premier to set his or her own financial agenda later.
The recovery strengthened significantly in 2010, with economic growth of 3.1%. Economic growth for 2011, 2012 and 2013 is predicted to be 2.0%, 2.6% and 2.7% respectively. With this growth, the Minister predicts that government revenue will increase by an average of 3.4% over the next 3 years.
The budgeted deficit for the 2010-11 fiscal year is now estimated to be
$1.265 billion, down from the $1.715 billion projected in last year's budget. The deficit will continue to fall - to $925 million in the 2011-12 fiscal year and to $440 million in the 2012-13 fiscal year. A balanced budget is predicted for the 2013-14 fiscal year.
As expected, very few tax changes were announced today, other than some technical changes. Future fiscal policy decisions will be left to a new leader and will be greatly affected by the outcome of the referendum later this year in which the people of BC will have their say on whether the HST will be retained in its current form or whether the province will go back to the old PST/GST system.
The following is a summary of the more important items of interest to our clients.
|
British Columbia Budget Projections
(in millions $)
|
|
|
|
|
Original Estimate
2010/2011
|
Revised Forecast
2010/2011
|
Projected
2011/2012
|
|
Revenue
|
39,190
|
39,893
|
41,337
|
|
Expenses
|
(40,605)
|
(41,008)
|
(41,912)
|
|
|
(1,415)
|
(1,115)
|
(575)
|
|
Forecast allowance
|
(300)
|
(150)
|
(350)
|
|
(Deficit)
|
(1,715)
|
(1,265)
|
(925)
|
PERSONAL TAX MEASURES
Home Owner Grant Act
For the 2011 taxation year, the threshold for the phase-out of the home owner grant is increased from $1,050,000 to $1,150,000. For properties valued above the threshold of $1,150,000, the grant is reduced by $5 for every $1,000 of assessed value in excess of the threshold. The grant is eliminated for properties valued at $1,264,000 and above for homeowners in general. An additional grant, available to seniors, veterans and the disabled is eliminated for properties valued at $1,319,000 and above.
The Home Owner Grant Act is amended to clarify that a person who is not eligible for a home owner grant or a low-income grant supplement must repay the amount received, plus interest, by the due date on the notice of disentitlement. In specified circumstances, the grant administrator may waive or cancel interest on a disentitled grant or low-income grant supplement.
OTHER CHANGES
International Business Activity Act
Tax refunds for BC corporate income tax paid by qualifying international businesses operating in BC are provided by the International Business Activity (IBA) Program. An announcement was made on May 11, 2010 to expand the program within the banking industry, allowing Schedule III banks to access the IBA Program. Schedule III banks are branches of foreign banks operating in Canada and they will qualify for the IBA Program with respect to their international financial business effective April 1, 2011.
Medicare Protection Act
Effective January 1, 2012, the Medical Services Plan premiums will increase by $3.50 per month to $64.00 for single persons, by $7.00 per month to $116.00 for two person families and by $7.00 per month to $128.00 for families of three or more persons.
Carbon Tax Act
Biomethane is a carbon neutral renewable fuel produced from biomass. Effective February 16, 2011, blends of biomethane and natural gas will be eligible for credit where the blends are sold under qualifying contracts by registered retail dealers of natural gas who inject biomethane into the system. To qualify, contracts must clearly indicate the amount that purchasers are paying for a specified volume or percentage of biomethane. The credit is equal to the carbon tax payable on the specified volume or percentage of biomethane. The credit will be provided to eligible purchasers on their natural gas bills.
School Act
The following was announced with respect to school property taxes:
- For the 2011 taxation year, the residential school property tax rate will increase by the previous year's provincial inflation rate.
- The total non-residential school tax revenue for 2011 will generally be limited to inflation plus new construction.
The rates will be set when revised assessment roll data are available.
Qualifying land, excluding improvements, is exempt from taxation on 50% of its value if it is used for a farm purpose. Amendments are made to clarify that managed forest land is not used for a farm purpose and, therefore, does not qualify for the exemption.
Taxation (Rural Area) Act
Rural area residential property tax is assessed at the same rate province-wide. For 2011, the rural area residential property tax will increase at a rate equal to the 2010 provincial inflation rate. This tax increase is in accordance with a longstanding policy for rate setting for rural area residential property taxes.
Non-residential rural area property taxes will be set so that total non-residential rural area tax revenue will increase by inflation plus new construction. The rates will be set when revised assessment roll data are available.
The Taxation (Rural Area) Act will be amended to allow supplementary taxation notices to be sent in the current year or in the following year to correct certain errors made during the preparation of the taxation roll for the current year.
University Act and Health Authorities Act
University and health authority properties are exempt from property taxes. For 2011, the University Act and the Health Authorities Act are amended to clarify that such property must be used for specific, exempt purposes in order to qualify for the property tax exemption. University property must be used by or on behalf of the university or an affiliated student society to qualify for the exemption, or if used by a third party, it must be used for a specific exempt use, such as for prescribed residential purposes. Health authority property must be used by or on behalf of the regional health board to qualify for the exemption, or if used by a third party, it must be used for a specific exempt use, such as to provide specified services in a hospital.
Following these changes, third parties occupying university or health authority property will be subject to a tax that is in closer alignment with occupiers of properties of tax-exempt owners in other locations. Third parties operating on their own behalf will be assessable and taxable unless the occupied property was exempt on the 2010 assessment role. If the property was shown as exempt on the 2010 assessment role, the property will continue to be exempt until December 31, 2015, or a change in occupancy, whichever occurs earlier.
HOW BRITISH COLUMBIA COMPARES
The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to February 15, 2011.
|
|
Top 2011
Personal Rates
%
|
2011
Corporate Rates
|
|
|
|
General
%
|
M&P
%
|
Small
Business
%
|
Provincial Retail
Sales
Tax
%
|
|
BC
|
43.70
|
26.50
|
26.50
|
13.50
|
7.00(5)
|
|
Alta.
|
39.00
|
26.50
|
26.50
|
14.00
|
-
|
|
Sask.
|
44.00
|
28.50
|
26.50
|
15.50
|
5.00
|
|
Man.
|
46.40
|
28.50
|
28.50
|
11.00
|
7.00
|
|
Ont.
|
46.41
|
28.50(1)
|
26.50
|
15.50
|
8.00(5)
|
|
Qué.
|
48.22
|
28.40
|
28.40
|
19.00
|
8.50(6)
|
|
NB
|
41.70
|
27.50(2)
|
27.50(2)
|
16.00
|
8.00(5)
|
|
NS
|
50.00
|
32.50
|
32.50
|
15.50
|
10.00(5)
|
|
PEI
|
47.37
|
32.50
|
32.50
|
12.00
|
10.00(6)
|
|
Nfld.
|
42.30
|
30.50
|
21.50
|
15.00(3)
|
8.00(5)
|
|
Yukon
|
42.40
|
31.50
|
19.00
|
15.00(4)
|
-
|
|
NWT
|
43.05
|
28.00
|
28.00
|
15.00
|
-
|
|
Nunavut
|
40.50
|
28.50
|
28.50
|
15.00
|
-
|
- The general business rate will be reduced to 28% on July 1, 2011.
- The combined general business and M&P rates will be reduced to 26.5% on July 1, 2011.
- The small business rate decreased from 16% effective for fiscal periods beginning on or after April 1, 2010.
- The tax rate for M&P profits eligible for the small business deduction is 13.5%.
- As part of the HST (combined rates are 15% in Nova Scotia, 13% in Ontario, New Brunswick and Newfoundland & Labrador, and 12% in BC).
- Provincial sales tax applies on GST. Effective combined rate is 13.925% in Québec and 15.5% in PEI.
The information in this publication is current as of February 15, 2011.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.
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