Everyone knows the weight that promises made by politicians hold. Despite saying all the right things, when in office, their actions often do not reflect their words.
A good example is all the talk about bringing well-paying tech jobs to BC’s communities. While the provincial government has talked a big game, their actions to date strike a very different reality. Although Premier Horgan has stated the government “want[s] to grow globally competitive industry clusters and help B.C., companies scale-up” the policies they have pursued do not reflect this goal at all. Rather than spur major tech industry growth in the province, the government’s policies are more likely to repel it.
One example of this disconnect between the words of the government and their actions is the Employers Health Tax (EHT), which came into effect this year. The EHT is a brand new tax on employers in the province, pegged at nearly $2 billion per year in perpetuity. Meanwhile, the government has promised to invest a measly $100 million into the tech industry by 2020.
At the same time the EHT is coming into effect, the Canada Pension Plan (CPP) rates on employers are increasing, a policy move the BC government supported. Together, these two taxes represent a significant rise in the tax burden shouldered by employers.
What will all of this new tax mean for actual tech firms?
Take a tech firm in BC which has 15 employees who earn the average salary of $1,690 per week in the industry. That firm will now face over $40,000 in brand new payroll taxes from the EHT and the CPP when fully phased in. If that firm wanted to hire a new employee, the new taxes will increase the cost by about $3,700 a year on top of all the other existing payroll taxes already in place. This does not sound like a recipe to help a tech firm to grow.
For BC to be competitive in attracting tech firms into the province, the taxes paid in the province cannot be higher than what the same firms would pay in comparable jurisdictions.
BC needs to be wary of challengers within Canada who are increasing their share of the tech sector. While BC is increasing the tax load for businesses in the province, Alberta and Ontario are both going the other way and are reducing taxes. If the BC government really wants to attract tech companies from outside or help those inside the province grow, they need to take a hard look at some of these punitive payroll policies being put in place.
This is something insiders in the tech industry are also noticing. In April, when the provincial government refused to work with the federal government to continue funding “Cube”, a tech firm incubator in Vancouver, the incubator was forced to shut its doors to the firms who relied on it. This led industry insiders to call out the provincial government for making it harder for new firms to bring their ideas to fruition.
Unless we start seeing changes, these policies will be a driving force for some firms to choose to locate their businesses elsewhere. Clearly, someone needs to tell the BC government that their policy actions speak louder than their words.
Richard Truscott is the B.C. and Alberta vice-president at the Canadian Federation of Independent Business