2010 B.C. Budget Update

2010 B.C. Budget Commentary^©

B.C. Finance Minster Colin Hansen announcing the 2010 B.C. Budget in Victoria

On March 2, 2010, the Honourable Colin Hansen delivered his second budget as Minister of Finance. The following is a summary of the tax highlights. The information contained herein is current as of March 2, 2010.

Personal Tax Changes

Effective January 1, 2010, the B.C. basic personal amount is increased to $11,000 from $9,373 in 2009.

Business Tax Changes

The new B.C. Interactive Digital Media tax credit will be 17.5% of qualifying labour employed in B.C. for the development of qualifying interactive digital media.
Film Tax Credits is enhanced as follows:
1. The basic Production Services tax credit rate is increased to 33% from 25%.
2. The Film Incentive B.C. tax credit rate of 35% applies to qualifying B.C. labour expenditures up to a cap of 60% of total production costs, increased from a cap of 48%.
3. The Digital Animation or Visual Effects tax credit is increased to 17.5% from 15%.
Amendments to introduce a minimum for financial institutions in the Corporation Capital Tax Act has been repealed.

Harmonized Sales Tax (HST)

To help low and modest income taxpayers to cope with the forthcoming HST (effective July 1, 2010), a new B.C. HST credit has been introduced. The maximum annual credit amount is $230 per family member. This credit amount is reduced by 4% of net income for the prior year in excess of $20,000 for single individuals. For families, the reduction is 4% of family net income in excess of $25,000. Family net income includes the recipient's and spouse's net income from the prior year. This credit will be paid together with the GST credit and the BC Low Income Climate Action tax credit quarterly. The first payments will be made in July 2010.
Due to the elimination of the provincial sales tax (PST), the BC sales tax credit is integrated with the aforesaid B.C. HST credit effective for the 2010 year.
The Social Service Tax (PST) and the Hotel Room Tax (HRT) are replaced by a 7% BC HST rate resulting in a combined HST rate of 12%.
After June 30, 2010, the Social Service Tax Act will be replaced by the Consumption Tax Rebate and Transition Act.

Other Notable Changes

Effective January 1, 2011, the maximum Medical Services Plan (MSP) monthly premium rates will be increased to $60.50 (an increment of $3.50) for single persons, $115.00 (an increment of $7.00) for for two person families and $121.00 (an increment of $7.00) for families of three or more persons.
Effective March 3, 2010, no property transfer tax is payable on transfers to correct conveyance errors. The requirement to obtain an administrator's certificate prior to registration of transfers to correct the error is eliminated. Exemption for transfers required to amend a strata plan is re-instated and will be similar to the exemptions provided for transfers for subdivisions.
For the 2010 taxation year, the threshold for the home owner grant phase-out remains the same of $1,050,000. The grant is reduced by $5 for every $1,000 of assessed value in excess of the threshold and is completely eliminated for properties valued at $1,164,000 and above.

Comparisons of Major Tax Rates Among Canadian Provinces and Territories

The chart below compares top personal and corporate tax rates and sales taxes in 2010 for all provinces and territories.

Provinces/Territories		*B.C.*	Alberta	Saskatchewank	Manitoba	Ontario	Quebec	NB	NS	PEI	NFL	Yukon	NWT	Nunavut
Top 2010 Personal Rates %		*43.7*	39	44	46.4	46.41	48.22	43.3	48.25	47.37	44.5	42.4	43.05	40.5
2010 Corporate Tax Rates	General %	*28.5*	28	30	30	32⁽²⁾	29.9	30⁽³⁾	34	34	32	33	29.5	30
	M&P⁽⁰⁾ %	*28.5*	28	28	30	30⁽²⁾	29.9	30⁽³⁾	34	34	23	20.5	29.5	30
	Small Business %	*13.5*	14	15.5	12⁽¹⁾	16.5⁽²⁾	19	16	16	13.1⁽⁴⁾	16	15⁽⁵⁾	15	15
Provincial Retail Sales Tax %		7⁽⁶⁾	-	5	7	8⁽⁶⁾	7.5⁽⁷⁾	8⁽⁸⁾	8⁽⁸⁾	10⁽⁷⁾	8⁽⁸⁾	-	-	-

Notes to the Table Above

M&P stands for manufacturing and processing. It generally involves making a product for the purpose of sale or lease.
The combined small business rate will be reduced to 11.0% on December 1, 2010.
The Ontario corporate rates will be reduced on July 1, 2010. The general business rate will be 30%, the M&P rate will be 28% and the small business rate will be 15.5%.
The combined general business and M&P rates will be reduced to 29.0% on July 1, 2010.
The combined small business rate will be reduced to 12.0% on April 1, 2010.
The tax rate for M&P profits eligible for the small business deduction is 13.5%.
The provincial sales tax will be harmonized with the GST on July 1, 2010 (combined rates will be 13% in Ontario and 12% in BC).
Provincial sales tax applies on GST. Effective combined rate is 12.875% in Québec and 15.5% in PEI.
As part of the HST (combined rate is 13% with GST).

Despite the alleged success of the 2010 Winter Olympic and the forthcoming of the Paralympic Winter Games, B.C. will continue to run on a deficit budget of $1.7 Billion for 2010-11. According to government projections, the provincial budget will not balance until 2012-13.

BC Budget 2010 also provided support for more affordable housing and families with children, notably a new property tax deferral program for families with children under age 18 (starting 2010).

The unpopular HST has attracted organized opposition from various groups. Led by B.C. former premier Bill Vandersam, effort seeking a HST referendum is underway. It is difficult to change laws passed by a majority government. Mr. Vandersam's noble effort is likely to be futile. It is also noteworthy to remark that civil servants working on the soon-phased out PST regime received a transfer package to work for Canada Revenue Agency (CRA). Unlike the Ontario provincial government (who generously pay its transferred employees a 6-month severance pay when they suffer no loss of employment and their job security is guaranteed by a 2-year contract), B.C. government will not pay severance pay to those who are about to be transferred to CRA.

The 2010 Budget of the Ministry of Children and Family Development (MCFD) is vague (as usual) and does not allow readers to identify the costs of "child protection" activities like legal expenses, compensations of wrongful deaths, foster parents' fees, ... etc. In the Resource Summary Table below (on page 21 of the 2010 MCFD Budget), MCFD's activities are vaguely described as "Children and Family Development" with a core business value characterized as "strong, safe and supported".

2010 MCFD budget discussed 7 "performance measures". Performance Measure # 3 on page 19 projected the number of families participating in "collaborative planning decision making process" will increase to 5,300 from 2008-09 baseline of 2,967. Special interests in this multi-million dollar "child protection" industry have successfully influenced the government to allocate more fundings to their activities even in time of economic difficulty. It is done tactfully at a gradual and small increment that would not attract attention of any watchdogs. Furthermore, it appears that service providers in this unique industry are able to determine or correctly estimate the demand of their services.

2010 B.C. Budget Commentary©

2010 B.C. Budget Commentary^©