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Tony Wilson

Sorry small businesses. No love from B.C. budget Add to ...

One might have hoped the B.C. budget, revealed Feb. 21, would have had more small-business initiatives.

According to the provincial government’s own reports, there were more than 391,700 small businesses in British Columbia in 2010, accounting for 98 per cent of all companies and employing approximately a million people. That would represent 57 per cent of all private sector jobs in the province.

Just to make the point even stronger, in 2010, approximately 30 per cent of B.C.’s GDP was generated by small business, above the national average of 27 per cent. And small business was the source of 33 per cent of all wages paid to workers, which was the highest share of any province.

So what were the highlights? Not much for small business, I’m afraid.

A promised small-business tax cut was cancelled and remains at 2.5 per cent – rather than the “zero” cited in earlier budgets – and the corporate tax rate will rise to 11 per cent in two years if the financial situation in B.C. does not improve. It would appear the policy of attracting investment to the province by striving to be one of the lowest tax jurisdictions in Canada has been shelved, in light of the fiscal realities of a forecasted $968 million deficit. The government’s plan is to balance the budget by 2013, which will be just before the provincial election.

“Fiscal discipline” is a noble goal for all governments these days. One need only look to Greece as an example of state-sponsored profligacy with catastrophic consequences – a nation guardedly watched by Italy, Portugal Spain and Ireland (the PIIGS) – and of course by France and Germany, which are still bailing out Greece and are terrified about the others.

B.C.’s Ministry of Finance has no doubt read the report by economist Don Drummond with respect to Ontario living beyond its means and the steps that may have to be taken to avoid further downgrading of the province’s debt, and the consequences that flow from spending too much on public services without the tax base to support it.

In B.C., the government is holding the line on public spending – effectively continuing the freeze on public sector pay increases at zero and keeping funding to school districts at $4.7 billion a year. While the business community is publically behind the government’s austerity measures, it’s not something that go over well with a number of groups, especially the British Columbia Teachers Federation. It is demanding a whopping 15-per-cent wage increase and benefits, including 10 days of bereavement leave for the death of a friend, which has led some media commentators to ponder whether that would include Facebook friends.

Other commentators have speculated that the teachers may be “reaping what they sowed:” they might well have had a pay raise if the HST had passed in a referendum in 2011. The BCTF was against the HST and it encouraged its members, and the public, to vote against it.

The government is planning to impose a legislated settlement on the teachers, and on Feb. 28 and 29, the teachers will vote on whether to escalate the limited “teach only” job action to a full-scale walkout. Any walkout by B.C. teachers will have an effect on businesses in the province, which will have to deal with complicated staffing issues that will arise from employees having to deal with school closures and child-care arrangements.

As for the justice system, $237-million more will be spent over three years, including money for increased RCMP costs, court staff, sheriffs and prosecutors, as well as $3 million over the next three years to comply with an arbitration decision giving prosecutors and other legal staff a benefits increase. Another $2 million will go toward enhanced benefits for judges. But the Canadian Bar Association’s B.C. branch expressed disappointment that the government decided to maintain “status quo” levels in the justice system and overlook public demand to restore funding to legal aid as an essential service.

The CBABC says “underfunding legal aid affects families in crisis and results in clogged courts that slow all cases down, increasing the risk of serious criminal cases being dismissed because they take too long to get to trial.”

First time home buyers will receive a tax credit of up to $10,000 to purchase a new house, although the credit declines for individuals and families with a net income of $150,000, and it is completely eliminated for individuals earning $200,000 in net income and families earning $250,000. How this initiative will assist first-time home buyers in the hot markets of Vancouver, Victoria and the Okanagan is questionable. Additionally, seniors may receive a renovation tax credit worth up to $1,000 a year to renovate their homes so they can continue to live in them.

An interesting initiative is the suggestion that two liquor warehouses in Vancouver and Kamloops, owned by the Crown and operated by the BC Liquor Distribution Branch, would be “privatized” through an RFP process. Although some early reports said this was simply a sale and leaseback of the land assets, other reports now suggest the government might give up its lucrative monopoly for the wholesale warehousing and distribution of liquor, and sell those rights to a private company.

“There’s nothing worse than a public monopoly than a private monopoly,” one private liquor storeowner said when he heard the news. But there may be many big businesses interested in taking over the wholesale operation of liquor distribution and that will be involved in the expected RFP process.

Any move to streamline B.C.’s byzantine liquor distribution system, even through some degree of privatization, will likely be welcomed by the business sector: it could conceivably mean more choice for consumers; more opportunities for distributors, restaurants and private liquor stores; and more efficiencies. On the other hand, there is a strong financial argument for keeping ownership and pricing control of the wholesale distribution of liquor – a cash cow in B.C. – but selling off the inefficient and high-cost retail government liquor stores to the private sector, where labour costs are lower.

Perhaps this is something the province will consider in the coming year.

Special to The Globe and Mail

Tony Wilson practices franchising, licensing and intellectual property law at Boughton Law Corp. in Vancouver, an adjunct professor at Simon Fraser University, and the author of two books: Manage Your Online Reputation , and Buying a Franchise in Canada . His opinions do not reflect those of the Law Society of British Columbia, SFU or any other organization.

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