B.C. budget surplus means tax cuts for business, individuals

Yesterday, the B.C. government introduced its 2017 budget.

For fiscal 2016-17, the forecasted budget surplus is $1.5 billion — about $1.2 billion better than expected a year ago.

“The largest improvement on the revenue side comes from personal income taxes and property transfer tax, which includes revenue from the 15% foreign-buyer tax effective August 2,” notes a brief from CIBC Economics.

Read: Study reveals hidden tax in B.C.

The surplus is projected to steadily decline over the next three years, from $295 million in 2017-18 to $223 million in 2019-20.

Indicators show B.C.’s growth was 3% in 2016, with growth projected at 2.1% for 2017.

The Ministry of Finance released a conservative economic forecast for the province, considering a potential slowdown in economic activity associated with U.S. policies, fragility in Europe and slower Asian demand.

On the plus side, the surplus has resulted in some tax reductions:

• Small business

Small businesses will see a corporate income tax rate cut to 2% from 2.5% starting on April 1, saving them $68 million in 2017-18.

Businesses will also get some relief on their hydro bills with the gradual elimination of provincial sales tax on electricity. By the time the tax is eliminated on April 1, 2019, the government says small- and medium-sized businesses will save $50 million a year.

The B.C. government will also extend and enhance sector tax credits for scientific research and experimental development, and venture capital to support innovation, commercialization and the tech sector.

Read: Canadians should use TFSAs to invest in small business: MEI

In a release, IIAC president and CEO Ian Russell praised the budget: “Successful efforts to improve the business climate in the province will draw the attention of foreign and domestic investors.”

• First-time homebuyers

The threshold for a program to help first-time buyers is being raised to $500,000, meaning a break of up to $8,000 in the property transfer tax.

Read: Home sales plummet in previously red-hot Vancouver

• Medical service premiums

These premiums are being eliminated, though no timetable is established. But, beginning January 1, 2018, the government is introducing a 50% reduction in the fees for households with net incomes up to $120,000, which affects two million British Columbians. Families that pay the full premium will save up to $900 in 2018.

Individuals with net income up to $26,000 and couples with two children and family net income up to $35,000 will be exempt from the premiums after the government raises income thresholds next year.

Read the full budget here.