Government policies mean the province is gaining an international reputation as a place where major projects can’t get done

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By Charles Lammam
and Hugh MacIntyre
The Fraser Institute

More British Columbians think the province is on the wrong track than the right one, according to a new Angus Reid poll. And there’s good reason to be concerned about B.C.’s policy direction.

Charles
Lammam

Since assuming office last year, Premier John Horgan’s government has done little to reassure investors and entrepreneurs that British Columbia is an attractive place to invest. In fact, its policies have signalled the opposite.

Consider the attempt to block the Trans Mountain pipeline expansion project, which had already been approved by a thorough federal review. In the 11th hour, the government erected an unexpected roadblock, arguing in court that B.C. has the right to stop the project.

The ensuing war of words – and legal action – between Alberta and B.C. has been well-documented.

The result?

Immense policy uncertainty.

Hugh
MacIntyre

Partly because of this pipeline project, B.C. – and Canada more generally – is gaining an international reputation as a place where major resource projects can’t get done. And this is turning investors and entrepreneurs away from the province at a time when serious concerns already exist about B.C. as a destination for resource projects.

In a recent survey of upstream oil and gas executives, B.C. ranked dead last among Canadian provinces and in the bottom quarter internationally for investment attractiveness. While the provincial government hopes to see liquefied natural gas (LNG) development, pipeline obstructionism has undermined its credibility on that file.

Moreover, B.C.’s tax competitiveness has taken a major hit recently.

The province’s longstanding high effective tax rate on investment (one of the highest in the developed world) was made worse when the government increased the statutory corporate income tax rate (from 11 per cent to 12 per cent) shortly after taking office. At the same time, the United States has dramatically eased its taxation of capital, which will encourage investment dollars to go south.

Additionally, at a time when the U.S. is eschewing carbon pricing, B.C. is significantly raising its carbon tax rate (by 66 per cent, from $30 to $50 per tonne) while abandoning any pretence of revenue neutrality – whereby new revenues into government coffers are offset with new tax cuts.

B.C. is also replacing Medical Service Premiums with a new employer-based payroll health tax, despite the government’s own task force warning that such a move will undermine the province’s competitive position.

Making matters worse, just as the U.S. cut its top federal personal income tax rate, B.C. created a new, higher rate of 16.8 per cent, making the combined federal-provincial top rate a hair away from 50 per cent and the ninth highest rate in Canada and the U.S. This shows a worrying disregard for the ability of the province to attract and retain skilled workers and entrepreneurs.

In keeping with its high tax mantra, the government also raised taxes on high-valued homes and “luxury” cars. New regulations are being contemplated on labour in addition to a substantial minimum wage hike.

It’s all about the signals. And the signals as a whole don’t instil confidence among investors.

All this is happening against a backdrop of an enduring investment problem in the province. For more than three decades, investment per worker in B.C. – a measure of the tools available to workers to improve their productivity – has lagged behind the rest of the country. The most recent data (for 2016) shows B.C.’s investment per worker 19 per cent below Canada’s overall level. This means B.C. workers have significantly less capital (machines, equipment and technology) to do their job than workers in other provinces.

The situation has worsened in recent years. Business investment in B.C. (excluding residential structures) fell from 2014 to 2016 by nearly a fifth after adjusting for inflation.

And yet, the government’s latest policies will likely further discourage investment and ultimately reduce the long-term prosperity of British Columbians. This is taking the province down the wrong track.

We saw this movie before, in the 1990s. It doesn’t end well.

Charles Lammam is director of fiscal studies and Hugh MacIntyre is senior policy analyst at the independent non-partisan Fraser Institute.


British Columbia

The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.

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