Budget consultation

UPDATE

In October, the Institute released its annual BC Check-Up, which measures how BC stands up as a place in which to "Invest, Live, and Work." While the findings reflected the difficulties of 2001, they also showed 2001 to be a year in transition-one that should lead to more positive results when the Check- Up "checks in" for 2002.

The findings of the BC Check-Up provide the basis for CAs to offer input and advice to provincial policy-makers as they develop the provincial budget for the next fiscal year. This September and October, as in previous years, the legislature's Select Standing Committee on Finance and Government Services held a series of pre-budget consultation hearings in 13 different locations across the province. In several of these locations, CAs took advantage of the opportunity to participate in the process.

Chaired by Peace River South MLA Blair Lekstrom, the Committee of backbenchers has ten other members, including Cowichan Malabar MLA Brian Kerr, FCA, and Vancouver-Kensington MLA Patrick along, CA. As with all such committees, the Opposition is also represented-in this case by party leader Joy MacPhail.

In tabling its budget last year, the government also introduced a three-year budgeting plan. This years budget consultation process asked participants not only for input and advice on the 2003/2004 provincial budget, but also sought guidance on fiscal policies right through to 2005/06.

Specifically, the committee asked the individuals, businesses, and other organizations who participated in the process three basic questions:

1. What changes should be made to spending targets in the 2003/04 budget?

2. What should the government's fiscal priorities be for available funds in 2005/06?

3. How should these funds be allocated? In his submission to the Committee, Institute CEO Richard Rees, FCA, offered a number of suggestions. Rees told the committee that CAs "urge, in the strongest possible terms, that the government maintain its commitment to a balanced budget, regardless of economic fluctuations." And he reminded the committee that the CA professions general support towards the government's policy agenda has been primarily due to the belief that tax cuts would improve the province's business climate. "Amongst senior CAs in the province," said Rees, "there is virtually unanimous support for the personal income tax and business tax cuts made by the government."

At the same time, however, Rees conveyed the profession's disappointment with the fact that a specific three-year plan to reduce business tax rates was not included in the 2002 Budget as part of the three-year strategic plan.

Rees reminded the committee that any tax changes should be subject to affordability. "We are not advocating business tax reductions that the province cannot afford," he said. "We are recommending that the province set out numerical targets for business tax reductions that will be gradually implementedbut only if the province can afford them. Adding these numerical targets to the 2003/04 budget will add certainty to investment decisions."

Rees called on the government to continue looking at ways to cut costs by cutting red tape, and proposed one area worth examining-harmonizing federal GST and provincial PST into a single tax structure (see page 6).

Institute First VP John Cowperthwaite, CA, joined Rees at the presentation and called on the government to commit to developing and adhering to "commit to developing-and sticking to-a debt management plan." Cowperthwaite also urged the government "to commit any unspent contingencies and any revenue windfalls to debt reduction."

At earlier hearings in Campbell River, local CA Brad Piercy, a partner with Huxham and Co, commented on the importance of a competitive tax climate. Piercy said that prior to the tax changes his office had seen "many highly-networked clients trying to get their residency or their corporate head office moved to Alberta, or structured so that there was income in Alberta."

Piercy cited both higher BC tax rates and the BC capital tax (which Alberta doesn't have) as reasons for the exodus. "Since you've come into power and reduced the tax rates," he said, "we now no longer effectively see that move."

CAs Mark Dickie, Ben Sander, and Mike Neir also made presentations in Prince George, Fort St. John, and Smithers.

And while it's the ICABC's position that balancing the budget should be the government's first priority, Amed Naqvi, CA, offered a caution to the government during his presentation in Nelson.

"I will agree that a strong economy should be the first objective of a government, and that a balanced budget is a worthy cause," said Naqvi. "But deep cuts in government spending can leave deep wounds, and rural BC will be the real victim, which all of us will feel. May I remind my Liberal government of the words of Canada's greatest Liberal, Mr. Trudeau-that we're not trying to achieve a balanced society; we're trying to achieve a just society."

Copyright Institute of Chartered Accountants of British Columbia Nov 2002
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