With a mission to inform, empower, celebrate and advocate for British Columbia's current and aspiring business leaders, BCBusiness go behind the headlines and bring readers face to face with the key issues and people driving business in B.C.
Issue link: http://digital.canadawide.com/i/1071224
BCBUSINESS.CA FEBRUARY 2019 BCBUSINESS 33 The provincial government has pledged to keep investing in transportation infra- structure, a change from previous NDP administrations, he says. As for housing, baby boomers will keep moving to B.C., but many will wait until retirement to buy a part-time home here so they can avoid the speculation tax, Jacobs thinks. Finning's Thomson has other tax concerns. The combined provincial- federal corporate income tax rate in B.C. is 27 percent, versus 21 percent in Washing- ton State, he says. Also, B.C. doesn't offer provincial sales tax exemptions, putting companies at a disadvantage to Alberta, which has no PST. "For us, PST's being lev- ied on things like machinery and equip- ment," Thomson says of Finning, which has about 1,400 staff throughout B.C. "There should be exemptions around that if we want to be competitive relative to Alberta or relative to the U.S." Bruce Ralston, minister of jobs, trade and technology, defends the EHT and the overall health of the B.C. economy. "I talk to a lot of businesses," he says of the tax. "Very, very few do raise it." Ralston also notes that for employers, Canada's pub- licly funded health-care system is a big competitive advantage over the U.S. "That tax measure replaces the medical services tax, which was an unfair, regressive tax, and that's coming off," he adds. Even factoring in payroll and health taxes and the recent U.S. tax cuts, B.C. holds its own as a tax jurisdiction, accord- ing to James Raymond, manager of research and analysis with the Vancouver Economic Commission (VEC). "Taxes go up and down, and you've got to look at the whole broad suite of tax," says Raymond, noting that in 2016, KPMG's Competitive Alternatives report found that Vancou- ver had the fifth-lowest business location costs among more than 100 cities world- wide. "Especially when you talk to foreign businesses, none of them say, Well, gee, the taxes are so expensive here we're not going to set up." Given that Ontario employers pay a similar tax, business should be able to absorb the EHT, reasons Iglika Ivanova, Vancouver-based senior economist with think tank the Canadian Centre for Policy Alternatives. Canada has very low pay- roll taxes compared to its Organisation for Economic Co-operation and Develop- ment (OECD) peers, Ivanova observes. For her, the EHT is "a more equitable way to distribute the cost of health care over the business sector, rather than rely on good employers to shoulder the cost." Ivanova also points out that in the Competitive Alternatives report, taxes typ- ically made up no more than 18 percent of the location-sensitive costs for a busi- ness. "There's a number of other areas where we can compete, and I would say that competing on taxes is not a smart move," says the member of the provincial government's Emerging Economy Task Force. "We should instead be competing on labour force investment, the fact that we have skilled, educated people, the fact that we have attractive places to live with good-quality child care." The BC Chamber's Litwin credits the NDP for its child-care investments and the Emerging Economy Task Force: "That task force is broadly sectoral and, I think, has a lot of really smart people noodling on the problem of what does the B.C. economy need to look like in the future such that we all have a chance at prosperity." Looking ahead, it bothers BCBC head D'Avignon that B.C. and Canada still use a tax model that's hardly changed since the Second World War. "The PST in B.C. is an archaic tax that punishes innovation and growth and investment," he says, highlighting American changes to inter- est and repatriation-of-capital provisions. "I've seen firms around our table with a 30-percent advantage by moving some of their operations into the U.S." A LOW-HQ TOWN When Miklós Dietz moved to Vancouver from McKinsey's Budapest office in 2015, two things surprised him. First, the pub- lic showed little awareness that corporate headquarters are a powerful economic driver. His second surprise: "Different organizations are working on this, but they aren't necessarily fully aligned." Just how short is B.C. on corporate HQs? In 2018, Minnesota was home to the head- quarters of 19 Fortune 500 companies. "We have zero," says Vancouver managing partner Dietz, who also leads the strategy and corporate finance group in McKinsey's global financial services practice. "We are minnows, and that's the problem." To make his case, Dietz distinguishes between two kinds of investment. B.C. has The Chambers of Commerce Group Insurance Plan® gives you affordable, flexible insurance options, unbeatable guarantees, and value-added benefits. See why 30,000 business owners selected this plan! chamberplan.ca