VICTORIA – The B.C. government is restricting spending increases and keeping its small business income tax alive to meet its balanced budget target before the 2013 election.
Finance Minister Kevin Falcon presented his first budget Tuesday, with a deficit of $969 million for the fiscal year starting April 1, as B.C. pays to end the harmonized sales tax. His three-year plan predicts a $154 million surplus in 2013-14 and $250 million surplus the following year.
To do that, the budget aims to hold government spending growth down to two per cent for three years, with most of it going to health and education. That leaves most other ministries with little or no increase for inflation, a restriction that is expected to reduce overall B.C. government staff from about 27,000 this year to 25,000 by 2014-15.
Falcon also reversed course on business taxes. The government has been promising for years that it would eliminate the small business income tax this spring, after lowering it to the current 2.5 per cent. Now it will continue at 2.5 per cent until B.C.’s financial picture improves.
Falcon is also considering a one per cent increase in the general corporate tax rate to 11 per cent, but not for another year depending on financial conditions. That move positions the B.C. Liberals politically for an election against NDP leader Adrian Dix, who has called for a corporate tax increase.
Canadian Federation of Independent Business spokesperson Shachi Kurl said business people understand the need for government revenue, but the extra tax burden will affect investment.
The last scheduled carbon tax increase will go ahead on July, from 5.56 cents on a litre of gasoline to 6.67 cents. The budget holds that level while a review of the carbon tax program looks at the rate and offsetting income tax cuts.
Falcon promised carbon tax relief soon for greenhouse operators, and hinted at additional help for other farmers.
The cash-strapped government is putting surplus provincial assets up for sale starting next year, including a seven-hectare property north of Kelowna that was proposed for a new Okanagan correctional centre before a new site near Oliver was chosen. Another six-hectare parcel in Surrey is to be sold, along with about 100 others around the province, many of them school properties.
The budget also reveals a plan to sell B.C.’s liquor distribution system and warehouses to a private operator. Falcon called the move “an opportunity to get out of a business we don’t have to be in,” as well as a way to raise money. Falcon said the deal will protect union workers in the transition to a private wholesaler. Government retail liquor stores are not affected.
Liquor and tobacco taxes will be adjusted to keep prices the same once the HST is phased out.