BC Businesses Urge Fiscal Retrenchment Despite Rebound

by Mike Godfrey, Tax-News.com, Washington

23 September 2010

The British Columbian Chamber of Commerce has warned against government plans to reinvest better-than-expected corporate income tax revenues into social projects, or into individual income tax cuts, as has been proposed.

The Chamber of Commerce comments come after the British Columbian government revised upward its four-year fiscal outlook by CAD2.7bn (USD2.65bn) after a sizeable recovery in corporate tax receipts.

Of this surplus, the government has said CAD565m will go towards reducing the operating deficit with the remainder to be reinvested. The government has asked British Columbians for their perspective on how the remaining funds should be invested in the 2011 budget. The government has asked for instance whether the money should be channeled into new programs and services, or whether the tax burden on workers should be slashed.

In response to the consultation, John Winter, President and Chief Executive Officer of the Chamber, said: “[News that receipts are expected above that budgeted] shows that the shoots of recovery are taking hold." However, he has argued that these unexpected revenues should be used more responsibly.

The Chamber said that “the most effective approach would be to dedicate all additional revenue to reducing the deficit, thereby reducing the burden on future generations and achieving balanced budgets as early as 2011-12.”

“With significant concern over the fledgling global recovery prevalent in the US and around the world our members are clear; increasing government spending or reducing revenue with such an uncertain future will be dangerous to our future fiscal stability,” Winter said.

The BC Chamber has instead recommended that Budget 2011 should:

• Address public spending;
• Review the role of crown corporations to ensure effectiveness;
• Maintain just the tax cuts that are already budgeted for;
• Review the fiscal sustainability of local government; and finally,
• Introduce a plan for tackling the provincial debt load.

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