Provincial Sales Tax continues to be hindrance on B.C.'s economic growth

VANCOUVER, BC--(Marketwired - October 17, 2016) - B.C.'s CPAs are increasingly finding the current provincial sales tax (PST) regime to be hindering business success in B.C. Nearly 60 per cent of CPAs find the return to the PST system has posed a "major" or moderate" challenge to business success, an increase of 6 per cent from 2015, in the latest Business Outlook Survey administered by the Chartered Professional Accountants of British Columbia (CPABC).

Over a quarter of those who ranked the return to the PST system as a major challenge to business success cited "higher taxes or costs for business" as the main impact of the PST. At 27.5 per cent, B.C. also has the second highest Marginal Effective Tax Rate (METR) in Canada. The biggest impact of the METR when comparing across provinces is the application of a retail sales tax on all business inputs. In fact, by reinstating the PST, an additional 10 per cent cost is applied on business inputs compared to when the Harmonized Sales Tax was in place.

The current tax regime is a hindrance on investment and productivity, negatively impacting job creation and economic growth. The decline in the value of the Canadian dollar further reduces business spending power, as most new equipment and technology is purchased in the United States. This has the potential to be a significant longer term problem for B.C.'s economy.

Quote
Richard Rees, FCPA, FCA, president and CEO of CPABC
"A modern, efficient, and competitive tax system is critical to the productivity and overall economic success of our province. 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 operations looking to establish their corporate operations in a new jurisdiction. For these reasons, CPABC has again recommended to the provincial government that it should implement input tax credits for business capital investment for the upcoming fiscal year. This would encourage investment, maintain our province's competitiveness, and drive productivity, all of which are crucial for economic growth."

Key findings from CPABC Business Outlook Survey

• When comparing B.C. to the rest of Canada, 36 per cent of respondents predict B.C.'s economy to grow faster than the Canadian average in the next two years. This percentage is up from 2015 (30 per cent) and 2014 (29 per cent) indicating an increasingly positive outlook for the province's economy.
• Consistent with results from the past two years, survey respondents continue to be optimistic about B.C.'s economy with 62 per cent rating it as "good" or "excellent." This positive outlook continues with one-quarter of respondents expecting B.C.'s economic performance to improve over the next two years.

About the CPABC Business Outlook Survey
CPABC commissioned NRG Research Group to conduct a web-based survey of CPA members regarding their impressions of the current and future of the economy in areas that they work, current challenges for business success, and the business climate in British Columbia. A total of 3,622 online surveys were completed between August 22 and September 6, 2016, which represents an overall response rate of 17 per cent.

About CPA British Columbia
The Chartered Professional Accountants of British Columbia (CPABC) was formed through the amalgamation of the Institute of Chartered Accountants of BC (ICABC), the Certified General Accountants Association of BC (CGA-BC), and the Certified Management Accountants Society of BC (CMABC). CPABC was officially established when the CPA Act came into effect on June 24, 2015. CPABC represents over 34,000 members and 5,200 CPA students and candidates.