budget recommendations - cpabc · relocated to bc from alberta and other provinces. unprecedented...

ANNUAL REPORT 2012/2013

Budget Recommendations Presented to the Select Standing Committee on Finance and Government Services

by the Chartered Professional Accountants of British Columbia

BUDGET 2018-2019

CPABC Budget Submission to the Select Standing Committee on Finance and Government Services 2

Table of ConTenTs

inTroduCTion 3

ensure bC’s business Tax CompeTiTiveness 5

minimize The labour skills gap 7

highlighTs from CpabC business ouTlook survey 9

abouT The CharTered professional aCCounTanTs of briTish Columbia 11

appendix 1: assessmenT of response To 2017-18 reCommendaTions 12

appendix 2: bC CheCk-up 14


inTroduCTion

The Chartered professional accountants of british Columbia (CpabC) is one of the largest professional organizations in the province, representing almost 35,000 members and 5,000 Cpa students.

established when the Chartered professional accountants act came into force on June 24, 2015, CpabC is an amalgamation of the institute of Chartered accountants of bC, the Certified general accountants association of bC, and the Certified management accountants society of bC.

Canadian Cpas are globally recognized as leaders in industry, commerce, finance, government, public practice, and other areas where accounting and financial management is required. Cpas advise multinational corporations, large and small businesses, not-for-profits, government agencies, and individuals.

Cpas are on the front lines of business in bC, and they see firsthand what issues are affecting investment and the economy.

CpabC would like to thank the select standing Committee for considering the organization’s views and recommendations. attached as appendix 1, is a summary of the recommnedations that were featured in the 2017-18 budget, together with CpabC’s assessment of the government action to date.

according to CpabC’s bC Check-up (appendix 2), bC’s economy enjoyed another year of solid expansion in 2016, with a real annual gdp growth rate of 3.7%. The growth in bC’s economy could be attributed to an expansion of the province’s labour market and population, as well as strong housing activity.

bC’s population grew by 1.25% to reach 4.75 million residents in 2016. net in-migration accounted for 49,489 of these new residents, split almost evenly between international and interprovincial immigrants. interprovincial in-migration has grown in the past few years, as many workers and their families, drawn by economic opportunities in our province, relocated to bC from alberta and other provinces.

unprecedented housing activity in bC generated employment in housing-related industries, such as construction and finance, insurance, and real estate. This helped to push employment up by 73,300 jobs to 2.38 million jobs in 2016, making it the seventh consecutive year where our province had positive job creation.1 approximately 85% of the new jobs were in the service sector. The goods sector also saw an increase in the number of new jobs, largely led by gains in the construction industry.

a spike in the demand for our wood and energy products led to an impressive 8.5% increase in the value of bC exports in 2016, reaching $39.0 billion. The us accounted for three-quarters of this gain. domestically, consumer spending in bC continued to swell in response to job creation and the wealth effect associated with rising housing prices. as of april 2017, retail trade was up 7.1% over the same period in 2016.

1 Chartered Professional Accountants of British Columbia, BC Check-Up, 2017.


bC remains in solid fiscal shape, running its fifth surplus in a row in fiscal year 2016/17. The government has declared another surplus for the current fiscal year and is expecting surpluses for 2018 and 2019. it is expected that bC’s economy will continue to grow, at a forecasted 2.9% gdp growth rate for 2017 and 2.1% for 2018, and remain as one of the top performing provinces.

unfortunately there are some fundamental structural issues that undermine the long term health of the bC economy and will ultimately impact our ability to afford all the education, health, and social services we wish to see funded. bC still lags in terms of business productivity. moving back to the psT system impacted businesses as it meant businesses had to pay the psT on inputs they use to produce and sell their goods and services.

as a result, businesses have to spend more to invest in capital that could be invested in human capital instead. in 2016, average labour compensation per worker was $54,030 in bC, below the national average of $58,162.

in addition, just under 70% of our labour force has at least some post-secondary education. While this is an increase over the past five years, it still lags behind the national average of 73%.

our relative low productivity compared to other jurisdictions like alberta and ontario could be due to our current tax structure and an abundance of small businesses, which could impact reinvesting decisions.

as bC is poised to lead the country in terms of gdp growth over the next few years, we should take advantage of this position and encourage the diversification and maturation of the economy by focussing on improving business productivity. as such, CpabC recommends the bC government should focus on the following policy areas to improve business productivity:

• EnsureBC’sbusinesstaxcompetitiveness;and

• Minimizethelabourskillsgap.

Based on the annual CPABC Business Outlook Survey, 32% of CPA respondents indicate they have either have a ‘good’ or ‘excellent’ opinion and 42% indicate they have a ‘fair’ opinion on the provincial government’s performance in creating a good climate for business and investment in BC.

CpabC business outlook survey 2017


CpabC continues to reiterate the need for a competitive tax regime in the province. a modern, efficient, and competitive tax system is critical to the productivity and overall economic success of bC.

in today’s global economy, all businesses evaluate the full range of taxation before deciding where they are going to invest or expand their enterprise. This is particularly the case for global organizations looking to establish their corporate operations in a new jurisdiction.

for the purposes of this submission, CpabC will focus on the provincial sales tax (psT). CpabC has consistently advocated for a simpler and more competitive sales tax. The current tax regime is a hindrance on investment and productivity, negatively impacting job creation and economic growth.

CpabC’s members have consistently ranked adding an input tax credit mechanism to the psT legislation as a government priority in the business outlook survey. in fact, our members have identified the current regime as a major source of frustration for businesses.

in the most recent survey, over half of our members indicated that the return to the psT system or the loss of input tax credits was a moderate or major challenge to business success in b.C.

among those who indicated that the loss of input tax credits is a major challenge to business success, eight-in-ten mention that it is inefficient to have two sets of sales taxes and that the psT is not recoverable by businesses. over two-thirds also mentioned that our psT regime reduced competitiveness against other jurisdictions, with almost as many saying that the psT system is too complicated.

as such, CpabC welcomes the government’s commitment to follow through with the february budget and eliminate the psT on electricity for businesses. it is a good first-step towards modernizing the psT system and should save businesses approximately $82 million in the next fiscal year.

ensure bC’s business Tax CompeTiTiveness

Almost half of BC’s CPA members indicate that the loss of input tax credits has increased the cost to conduct business, another 18% indicate that it has discouraged capital investment, and 11% indicated that it has delayed expansion plans.



maintaining business competitiveness is vital to long-term economic sustainability. any negative tax changes could affect our province’s ability to attract new business. over half of CpabC’s members indicate that an increase in the provincial corporate tax rate would impact their company’s or their clients’ business investment plan.

and comparing to other provinces, the recent budget 2017 update’s proposed increase in corporate income tax rate from 11% to 12% would place bC’s rate above ontario’s 11.5%, and in line with other western provinces. CpabC cautions against further increases to corporate taxation as it would impact our competitiveness against other jurisdictions and business investment.

CPABC Recommendation

#1. implement full psT exemption or input tax credit mechanism for business expenditures to encourage investment and to maintain our province’s business competitiveness and drive productivity that is crucial for economic growth.


CpabC’s members have consistently ranked the ability to attract and retain skilled labour as the most substantial challenge to business success in bC today. almost two-thirds say their business is experiencing recruitment challenges in finding employees with the right skills.

in 2016, bC gained a record 73,300 new jobs, to reach 2.38 million positions in total.2 most of these jobs were created in bC’s two most diversified regional economies — mainland/southwest and the vancouver island/Coast. These development regions have the most educated workforce, which is largely employed in highly skilled service industries.

other regions are also beginning to see increased demand for skilled employees, and the bC government has projected that between 2015 and 2025 three-quarters of the expected 934,000 job openings will require some post-secondary education and training.3

given this increased need for skilled labour there is growing concern about a labour skills mismatch, which occurs when a worker has either more or fewer skills than are needed for their job.4 such a mismatch can producesocietalchallenges;andaccordingto the Conference board of Canada, skills mismatches and shortfalls cost the province of bC billions in foregone gdp and millions in foregone tax revenues.5

acquiring higher or specialized education is important for gaining and maintaining employment. however, new graduates often do not have the necessary skills and experience required to be work-ready.

historically, post-secondary institutions, particularly universities, have focused on producing critical and creative thinkers, not grooming students for the job market. in addition, the skills employers require today may not be relevant in a year’s time, making it extremely challenging for universities to tailor their curricula accordingly.6

in order to match individuals to the right jobs and to allow businesses to stay competitive and productive, school-to-work transitions need to be improved through initiatives between post-secondary institutions and employers. The newly-established Canadian business/higher education roundtable has recently committed to making work-integrated learning an essential part of undergraduate education.7

minimize The labour skills gap

2 Ibid.3 WorkBC, British Columbia 2025 Labour Market Outlook, June 2016. 4 OECD, Getting Skills Right: Skills for Jobs Indicators, July 10, 2017. 5 Conference Board of Canada, Skills for Success: Developing Skills for a Prosperous BC, February 2015.6 Source: SFU faculty spokesperson7 Business Council of Canada, News, Everything university and college student should have access to work-integrated learning, business and post-secondary

When asked what the provincial government can do to address the disconnect between labour skills and employer demands, the most commonly mentioned suggestions are to ‘encourage active partnerships between post-secondary institutions, industry, WorkBC, and the BC Economic Development Association’ (59%) and ‘make work-integrated learning a mandatory component in post-secondary education’ (44%).



one of the most commonly known work-integrated learning models is the co-operative (co-op) program, which has been widely accepted in Canada and the us. many bC universities and colleges already offer co-op programs to undergraduates.

The programs alternate periods of academic learning with workplace experience for terms of four to eight months. This linkage between post-secondary institutions and industry produces graduates who are better equipped with work-ready skills.

several high technology companies, such as hootsuite, prefer to hire junior workers who have completed a co-op program.8 bC’s post-secondary educators and industries need to expand their efforts to work together to change and improve their curricula and provide applicable job training, ensuring a supply of qualified graduates who are work-ready.

8 Source: Hootsuite representative.

CPABC Recommendation

#2. The bC government should encourage active partnerships between post-secondary institutions, industry, and government departments, such as WorkbC and the bC economic development associations.

#3. The bC government should consider making work-integrated learning a mandatory component of post-secondary education.


Government Rating

overall, opinions of the governments’ performance in creating a good climate for business and investment in bC are not high. The federal government has the highest ratings with 35% positive (either ‘good’ or ‘excellent’), followed by the provincial government (32%).

When asked to rank their top three priorities for the provincial government to improve bC’s economy, CpabC members picked in order of importance: ‘invest in infrastructure’, ‘increase

skills training opportunities’, and ‘improve regional economic development’.

Federal Provincial Municipal

Excellent 2% 3% 2%

Good 33% 29% 25%

Fair 43% 42% 43%

Poor 16% 18% 20%

Unsure 6% 7% 9%

Top Economic Issues

Consistent with 2016, the top economic issue that challenges business success in the province is ‘housing prices’. not surprisingly, those in the lower mainland and on vancouver island are more likely to indicate it as a challenge (both 85%) compared to respondents in other parts of bC (79%). The ‘current value of Cad vs. usd’ and ‘global economic climate’ round out the top three most challenging economic issues.

Housing Prices Current Value of CAD vs. USD

Global Economic Climate

Major Challenge 57% 23% 17%

Moderate Challenge 27% 46% 49%

Minor Challenge 10% 22% 26%

Not a Challenge 4% 7% 4%

Not Applicable 3% 2% 3%

highlighTs from CpabC business ouTlook survey

base: all respondents, n=2,701



Overall State of the Economy

bC’s Cpas are fairly optimistic about the current state of bC’s economy compared to their impression of the rest of Canada and the united states. 72% of our members consider bC’s economic performance to be ‘good’ or ‘excellent’.

British Columbia Rest of Canada United States

Excellent 12% 2% 4%

Good 60% 49% 42%

Fair 24% 41% 38%

Poor 2% 3% 7%

No Opinion 2% 5% 10%

Two-Year Economic Outlook

looking at the economy over the next two years, half of bC’s Cpas think our economy will stay the same, while 19% think it will improve, and 28% think it will worsen.

British Columbia Rest of Canada United States

Improve 19% 27% 21%

Stay the Same 50% 55% 37%

Worsen 28% 12% 31%

No Opinion 4% 6% 11%




The Chartered Professional Accountants of British Columbia (CPABC) is the training, governing, and regulatory body for almost 35,000 CPA members and 5,000 CPA students. CPABC carries out its primary mission to protect the public by enforcing the highest professional and ethical standards and contributing to the advancement of public policy. CPAs are recognized internationally for bringing superior financial expertise, strategic thinking, business insight, and leadership to organizations.

CPABC Executive Committee Chair Heather Banham, FCPA, FCGA First Vice-Chair Barry Macdonald, FCPA, FCA Second Vice-Chair Ben Sander, FCPA, FCA Treasurer Geoffrey Dodds, CPA, CA CPABC President & CEO, Lori Mathison, FCPA, FCGA, LLB

For more information, please contact: Vivian Tse Public Affairs Manager Chartered Professional Accountants of British Columbia (604) 488-2647 [email protected] www.bccpa.ca

abouT The CharTered professional aCCounTanTs of briTish Columbia


appendix 1: assessmenT of response To 2017-18 reCommendaTions2017-18 CPABC Recommendation

Third Party Endorsement Government Action to Date

Recommendation #1:

Implement full PST exemption or input tax credit mechanism for business expenditures to encourage investment and maintain BC’s competitiveness.

The BC Commission on Tax

Competitiveness developed four

recommendations: full PST exemption

for business capital expenditure;

PST exemptions for certain business

inputs; made-in-BC Value Added Tax;

and Industry-Municipal investment

arrangements.

In Budget 2017-18, the government announced that effective Oct 1, 2017, the tax rate on electricity will be reduced to 3.5% from 7% and fully exempt effective April 1, 2019.

Recommendation #2:

Work closely with the federal government, post-secondary education institutions, and industry to develop a cross-sectoral policy that prepares post-secondary students for the workforce.

In its November 2016 report, the

Select Standing Committee on

Finance and Government Services

recommended the government

to partner with and build on the

work carried out by community

organizations who provide assistance

and training to support the under-

employed and those who face

additional challenges.

The Committee also recommended

that the provincial government

work with the federal government

to improve the effectiveness of the

Provincial Nominee Program and to

review the Labour Market Impact

Assessment.

N/A


2017-18 CPABC Recommendation

Third Party Endorsement Government Action to Date

Recommendation #3:

Continue to support initiatives like HQ Vancouver and consider expanding these initiatives to promote other major urban centres and cities that are hubs for key industries.

HQ Vancouver was established in February 2015 as a joint initiative among the governments of Canada and British Columbia, and the Business Council of British Columbia to build on Canada’s competitive advantages in key sectors to attract major international firms to set up their North American head offices in Vancouver, British Columbia.

Funding provided to the Greater Vanocuver Board of Trade and its World Trade Centre Initiative.

Recommendation #4:

Review and implement tax policies to modernize the current tax structure.

In its November 2016 report, the Select Standing Committee of Finance and Government Services recommended that the government should maintain a competitive corporate income tax rate and conduct a review of the small business tax rate.

In Budget 2017-18, the government announced that it would reduce small business corporation income tax rate to 2% from 2.5%.


appendix 2: bC CheCk-up

budget recommendations - cpabc · relocated to bc from alberta and other provinces. unprecedented...

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