FOR THE PROFESSION

BC Budget 2005/06

On February 15,2005, representatives of the ICABC attended the 2005 Budget Lock-up. Our delegation included ICABC President Barb Carle-Thiesson, FCA, First Vice-President Amed Naqvi, FCA, and CEO Richard Rees, FCA.

On behalf of this group, I'd like to thank those of you who took the time to answer our pre-budget survey. We used these results to guide our subsequent media commenrary, which focused on debt reduction and promoting fiscal responsibility.

Survey results indicated that members believe debt management/reduction should be the top priority for government, followed by business tax reductions, personal tax reductions for low-income British Columbians, and increased spending in key areas. Not surprisingly, 99.1% of you said along-term debt management plan is needed. And 93.8% said the small business tax threshold should be increased to $400,000.

This pre-election budget (and second consecutive balanced budget) brought a little something for everyone and highlighted the increased flexibility available to the government after having made tough fiscal decisions (reducing taxes, balancing the budget, and reducing red tape) earlier in its mandate. With the budget now in surplus, the government is reducing debt, increasing spending in key areas, and reducing taxes for small businesses and lower income British Columbians. We are now seeing the rewards of an improved investment climate in the province, which, in turn, will provide the financial capacity to fund the programs British Columbians need and want.

Movement on several fronts

In our October 2004 budget submission, the ICABC asked the government to consider six issues: debt management, contingency planning, competitive business tax rates, sales tax harmonization, enhancing productivity, and creating an emphasis on post-secondary education. With the release of the 2005 budget, we were pleased to see movement on most of these issues.

Increasing the small-business threshold

We also recommended that the government raise the small-business threshold from $300,000 to $400,000, and the budget reflected this change, thereby putting BC in line with other jurisdictions, including Alberta, Manitoba, New Brunswick, and Ontario.

Today, 98% of all BC businesses are small businesses. They account for approximately 917,000 jobs, or 58% of all private-sector employment.

"Small business is the engine that drives the BC economy," said Rees, "and reducing their tax burden will help small businesses remain competitive so they can grow and create jobs."

Debt reduction

The ICABC has been advocating for the development of a long-term debt-management plan for a number of years. The 2005/06 budget contains one of the strongest debt-reduction mandates to date, with a record $1.7 billion in debt reduction. With this reduction, it's forecasted that taxpayer-supported debt as a percentage of GDP will decline over the next three years.

While we were happy to see such a strong move toward debt reduction, we were disappointed to learn that there is still no long-term debt management plan-particularly this year, after the Select Standing Committee on Finance and Government Services echoed our recommendation to develop such a plan. We will continue to advocate for one in future years.

Personal tax reductions

The 2005/06 budget focuses personal tax reductions on lower-income British Columbians, combining tax and MSP premium reductions. These tax cuts result from the creation of a new, non-refundable personal income tax credit called the BC Tax Reduction, which will reduce or eliminate provincial income taxes for about 730,000 British Columbians. For instance, most individuals earning up to $16,000 a year will no longer pay any provincial income tax. In addition, a $4,000 increase in the threshold to qualify for the MSP Premium Assistance Program will reduce or eliminate MSP premiums for approximately 215,000 people.

The total cost for these tax reductions is estimated at $480 million over three years.

A special thank-you

Special thanks are extended to Odd Eidsvik, FCA; Jim Mills, FCA; and Cindy Popescul, CA, for providing regional budget commentary and follow-up to their fall budget presentations to the Select Standing Committee on Finance and Government Services.

For more specifics about the contents of the 2005/06 BC Budget, visit www.bcbudget. gov.bc.ca/.

Other highlights:

Tax reductions

* Changes to the First-Time Homebuyers Program, which will exempt first-time buyers from the property transfer tax on eligible residential properties.

* A 10-year extension of the Mining Exploration Tax Credit.

Program spending

* $6.5 billion over the next three years to increase ministry funding for health care, communities, children, education, public safety, economic development, and the environment, with 71% of the new funding directed to health care and education.

* $101 million to address the economic impacts of the mountain pine beetle infestation and forest fires.

* $194 million to assist persons with disabilities.

Increasing productivity

* Over $14 million for "BC Skills Connect for Immigrants," a program created to help new British Columbians find work in their fields of expertise.

* An additional $372 million in funding for post-secondary education and $450 million for student financial assistance.

BY MICHELLE McCORMICK

MANAGER OF PUBLIC AFFAIRS

Copyright Institute of Chartered Accountants of British Columbia Apr 2005
Provided by ProQuest Information and Learning Company. All rights Reserved