A new report by the Greater Vancouver Board of Trade (GVBOT) suggests businesses in British Columbia are being hit from all sides given the current economic conditions, and it paints a picture that businesses are facing hardship from some new government-imposed costs and policies.
They anticipate businesses in the province will face an additional $6.5 billion in direct costs due to decisions by governments, including increases to the corporate tax rate, the Employer Health Tax on payroll created just before the pandemic, and the business portion of the growing escalating carbon tax.
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The total financial impact includes $4 billion in net health taxes, $1.6 billion in corporate income tax, $1.2 billion in paid sick leave, and $500 million for the business share of the carbon tax.
The growing costs are limiting the potential of economic growth, homegrown entrepreneurship, and investment attraction amidst an ever-increasing competitive and challenging economic environment.
Businesses are also enduring higher interest rates and continued inflation, which places upward pressure on input costs, borrowing, and all expenses associated with owning and operating a business.
“Small and medium-sized businesses are disproportionately impacted by higher interest rates and rising costs that are making it incredibly challenging for them to grow and thrive,” said Bridgitte Anderson, president and CEO of GVBOT.
This does not include the 21% increase in the minimum wage between 2019 and 2023, the 10% increase in the top personal tax rate, the $200 million cost from the introduction of the new statutory holiday on September 30 each year, and the reversion back to the HST, which is estimated to cost businesses about $3.7 billion in 2022 alone.
Economic forecasts show BC’s real GDP growth could fall behind most provinces in 2023 and 2024 after being an economic and job regrowth leader amidst the pandemic’s earlier years and despite continued high population growth from elevated immigration levels.
“These cumulative costs can be the death by a thousand cuts for businesses. The government needs to take a holistic look at the tax and regulatory burden being placed on businesses in BC, especially small businesses,” reads the report.
“The mainland southwest region of BC has the highest population concentration as well as the highest number of small businesses. There is simply too much at stake to not consider how to improve, and not contribute to, the affordability challenges impacting all businesses.”
According to GVBOT, BC also has the highest marginal tax rates on new business investment in Canada and North America’s fourth highest personal tax rate — 16.5% higher than Washington state.
GVBOT is urging the provincial government to reduce the cost of doing business, particularly for small- and medium-sized businesses, such as increasing the Employer Health Tax threshold, introducing more PST exemptions on business costs, reducing the provincial portion of the commercial property tax, and make reforms to the BC carbon pricing system.