A new grant for post-secondary students, an increase in the marginal tax rate and expanding the PST to sweetened carbonated beverages were all part of the province’s latest budget tabled in the legislature on Tuesday.
Finance Minister Carole James said in this budget, the government’s focus is still on affordability issues facing people in the province, along with improving services and maintaining a sustainable economy.
“I think it really shows once again that as a government that we set a plan for ourselves, not based on when an election will be, not based on whether we’re going to head to the polls in six months or a year. I think we far surpassed the expiry date that most people believed a minority government would ever see,” James said.
“We focused on making sure that we delivered what we promised the people of British Columbia, which was affordability, which was improving services and that’s what this budget is about. I’m very proud of this budget, whether we face an election today or whether we face an election a year-and-a-half from now, which is what we expect. I think this is a budget that shows the people of British Columbia we were focused we came in on putting the people at the heart of all of our work into the budget and we’ve done that again this budget.”
The budget states each year of the fiscal plan is balanced, with a surplus of $227 million in 2020/21, $179 million in 2021/22 and $374 million in 2022/23.
“In addition, the plan maintains $2.3 billion in fiscal prudence through the forecast allowance and contingencies allocation,” the budget reads.
Carbonated Beverage Tax
Starting July 1, carbonated beverages that contain sugar, natural sweeteners or artificial sweeteners no longer qualify for the PST exemption for food products for human consumption.
Examples from the government include pop, diet pop, and sweetened carbonated water, with natural or artificial sweeteners. The B.C. government has clarified carbonated water products like Bubly, which are not sweetened naturally or artificially, will remain PST exempt.
The government says for “administrative ease”, provincial sales tax will also apply to all beverages that are dispensed through soda fountains, soda guns or similar equipment, along with all beverages dispensed through vending machines (except vending machines wholly dedicated to dispensing beverages other than sweetened carbonated beverages, e.g., coffee or water machines).
According to the B.C. government, the deterrence effect of this tax is expected to be most prevalent among frequent consumers of carbonated drinks. The government said in the budget men consume more soft drinks than women and additionally, soft drink consumption is highest among individuals aged 14-18 and declines with age. The Canada Food Guide does not recommend consuming most beverages affected by this measure, the provincial government said.
James said businesses should expect to still see sales in pop as reductions won’t happen overnight.
“I hope ultimately we do see reduction in the sales of sugary drinks, sweetened beverages. I think that’s an important health factor and a piece we’ll be watching,” James said.
“If you talk to the companies that sell pop and a number of other drinks, they talk about the fact that they are seeing some shift to other drinks other than pop, other than sweetened beverages and that’s something that if we can help a little bit and bring in a little bit of revenue to help with health costs, that’s a plus.”
PST on Netflix and other streaming services
The B.C. government has extended the provincial sales tax to streaming services like Crave, Spotify, Netflix, Disney Plus and more, effective July 1.
“Canadian sellers of goods, along with Canadian and foreign sellers of software and telecommunications services, will be required to register as tax collectors if specified B.C. revenues exceed $10,000,” the budget states. The PST rate for streaming services will be seven per cent.
Also effective on July 1, 2020, is a new tax on Canadian sellers of vaping products that will generate an additional $11 million to the government.
BC Access Grant
As part of the budget, $24 million is going to a new B.C. Access Grant, which starts in September 2020.
The annual cost of the new grant, which will replace existing provincial completion grants, will be $41 million annually.
Students will be able to receive up to $4,000 a year for programs less than two years. Students attending a program that runs for two years more will be able to get up to $1,000 a year from the BC Access Grant, in addition to up to $3,000 a year for the Canada Student Grant for full-time students. The Canada Student Grant is not available for programs under two years.
The previous provincial completion grants were not available to students taking programs under two years, such as trade certificate programs. The previous grants went to around 21,000 students. The government said the new BC Access Grant will benefit more than 40,000 eligible students.
The distribution of the BC Access Grant will be based on the current Canada student loan thresholds. For example in a family of four earning $70,000, in the family attending post-secondary programs under two years could receive up to $3,495.
The grant will only be available for students attending the 25 public post-secondary institutions across the province.
Students at private institutions will not have access to the grant. However, they will still be eligigible for the elimination of interest on B.C. student loans.
Marginal Tax Rate
Effective Jan. 1, 2020, taxable income exceeding $220,000 will be subject to a provincial personal income tax rate of 20.5 per cent — this increases the rate of tax from 16.8 per cent to 20.5 per cent. The charitable donation tax credit for individuals under the 20.5 per cent tax rate has also increased to 20.5 per cent for charitable donations over $200.
According to the government, this tax rate change affects approximately one per cent of the population of which 70 per cent are men. Approximately 75 per cent of the individuals subject to the tax are married or living in a common law relationship. Of the women who are married or in a common law relationship and are subject to the tax rate, 45 per cent have a partner who is also subject to the tax rate. Only 15 per cent of the men who are married or in a common law relationship who are subject to the tax rate have a partner who is also subject to the tax rate.
“I think if you had taken a look at the past governments, what often would happen at this time when you saw moderation in the economy is that you would see programs and services cut. You’d see programs eliminated. You’d see services and supports for families eliminated,” James said.
“We’re not doing that. In this budget, we made the choices to say we’re going to continue our investments because we believe they’re critical to growing the economy, for health communities to invest in childcare, to invest in housing, to make sure those supports are there in education. And in doing so, that helps grow the economy. In order to do that, we have asked the top one per cent to pay a little bit more.”
James said the province believes the top one per cent benefited from a strong economy.
“We continue to have a competitive tax environment in British Columbia and I think that’s very important to recognize,” James said.
“If you take a look at people under $140,000, we have the lowest tax rate in the country. People making up to $475,000, third lowest in the country. So our top marginal rate will match up with Quebec and Ontario and some of the other eastern provinces and we believe that’s reasonable to continue the programs and services that benefit high income earners, low income earners and medium income earners in British Columbia.”
Homeless Shelter Model and Funding
In the latest budget, the government is putting an additional $50 million toward the three-year plan on expanding programs and services to support people without a home or at risk of homelessness.
The government said investments will go toward 505 new shelter spaces across B.C. and an “enhanced shelter model,” dubbed navigation centres. The centres will have shelter services, medical services, social services and help placement assistant.
The province said two new 60-bed navigation centres will be opened in the province. The locations have not been announced.
Vancouver Island Projects
Here are the ongoing projects for Vancouver Island in the budget and three-year plan:
- $89 million for two new schools for the Sooke School District: 500-student capacity West Langford Elementary and 700-student capacity West Langford Middle School. Both are scheduled to open in September 2022
- Seismic upgrade for Victoria High School and building an addition to increase the capacity of the school by 200 spaces for a new capacity of 1,000. The project is anticipated to cost $80 million and be complete by 2022.
- $201 million for two new student housing buildings at the University of Victoria with a total of 620 new beds. There will also be a new dining facility and multipurpose program space.
- $82 million for Cowichan Secondary school, expected to be complete in 2024.
- Improvements to Highway 14, including widening and realigning 1.5 kilometres between Glinz Lake Road and Connie Road, a new park-and-ride facility on Gillespie Road, and wider shoulders between Otter Point Road and Woodhaven Road. The anticipated cost is $86 million with a completion date of 2022.
- A new Nanaimo Correctional Centre that will replace the existing 190 correctional centre and increase capacity with a 12-room unit for women. The anticipated cost is $157 million.
Delivering the first 10 batter electric buses for use by BC Transit in Victoria
The government said forestry workers and communities in B.C. have been affected by the Western Forest Products strike, declining harvests due to the mountain pine beetle infestation, extreme wildfire seasons of 2017/18 and 2018/19 and volatile softwood lumber prices.
In 2019/2020, the provincial government committed $69 million over two years to the Forestry Worker Support Program, which includes early retirement bridging for the affected workforce, placement co-ordination services, worker training programs, interim work opportunities for logging contractors and direct funding support provided to workers, families and contractors
There was also $5 million to support to coastal forestry contractors at risk of repossession of their logging equipment through the Coastal Logging Equipment Support Trust.
The latest budget will provide $13 million over three years to begin developing new opportunities for the “bioeconomy” and revitalizing the forestry sector. The government said this includes new and better inventory activities to get more out of our forest resources, expanding economic opportunities, and improving forest management planning and stewardship, through collaboration with First Nations and other stakeholders. This funding will also go toward expanding and promoting B.C.’s innovative wood products and technologies.
Provincial debt, economy risks and population growth
The province’s taxpayer-supported debt forecast for the end of fiscal 2019/20 is $1.8 billion lower than the forecast at Budget 2019. The government said taxpayer-supported debt remains affordable, with the taxpayer-supported debt-to-GDP ratio forecast remaining near 17 per cent over the fiscal plan period, and the debt-to-revenue below 95 per cent.
Total provincial debt is projected to increase by $17.0 billion over the fiscal plan period to reach $87.6 billion by 2022/23. The increase is due to borrowing requirements for capital infrastructure investments.
Taxpayer-supported debt is forecast to increase by $14.0 billion to $58.6 billion by 2022/23. This increase is due to funding for significant investments in capital infrastructure over the next three years. Debt increases associated with new investments include $6.4 billion for transportation sector projects, $2.0 billion for education, $2.7 billion for health facilities, $1.4 billion for social housing and $1.5 billion for other initiatives.
The current risks B.C.’s economy include:
lower commodity prices, particularly for lumber, pulp and coal
uncertainty regarding global trade policies, geopolitical tensions and broader economic challenges in Asia, Europe and the United Kingdom
timing of investment and hiring related to the LNG Canada project, similar to the risks that exist for other major capital projects
slower growth in domestic residential investment and household consumption
higher volatility in international foreign exchange, stock and bond markets
weak global economic activity with slowing growth in Asia and other regions; resulting in lower demand for B.C.’s commodity exports
Other risks to the fiscal plan include the financial results of ICBC, potential changes to federal government allocations for health and social transfers and cost-sharing agreements and increased demand for government services, such as health care, children and family services and income assistance.
The budget does not mention COVID-19, which is affecting China’s economy. There are currently five cases in the province.
“We’re not making changes at this point but we’re obviously monitoring it very closely,” James said, adding that she is confident in the health infrastructure in place to deal with COVID-19 (novel coronavirus) cases.
The population chart in the budget below shows that from 2001 to 2019, B.C.’s population grew by close to one million people, with much of the increase concentrated in the Lower Mainland. By 2024, B.C.’s population is expected to grow by a further 6.8 per cent or around 346,000 people.
With files from The Canadian Press and CBC