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Calculating the high cost of doing business in B.C.

B.C. government policies have added billions to cost of doing business in B.C.
Businesses increasingly feeling the weight of NDP government taxes and policies.

New mandatory paid sick leave, minimum wage hikes, health-care premiums shifted to employers, a new provincial holiday, ever-increasing carbon taxes – the cost of doing business in B.C. has ballooned in recent years, according to a new report from the Greater Vancouver Board of Trade (GVBOT).

Over a two-year period, from 2022 to 2024, GVBOT estimates the additional burden to businesses in B.C. will total $6.5 billion and will start taking its toll in the form of a drag on economic performance and growth.

“These cumulative costs can be the death by a thousand cuts for businesses,” the GVBOT study warns.

“In 2023, B.C. is entering a period of economic uncertainty, with many projecting a slowdown in economic growth or a shallow recession. While B.C. fared well during the pandemic compared to other provinces in growth and employment, many private sector forecasters project that B.C. will trail most provinces in real GDP growth in 2023 and 2024.”

GVBOT is projecting real GDP to contract by one per cent in 2023, before rebounding to 1.9 per cent growth in 2024. It notes that the Canadian Survey of Business Conditions found 34 per cent of businesses in Metro Vancouver expect a decline in profitability in the next quarter due to economic conditions.

"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 GVBOT CEO Bridgitte Anderson. "The report found that between 2022 and 2024, businesses in B.C. will shoulder an additional $6.5 billion in direct costs imposed by governments as they grapple with what is an already daunting economic outlook.”

The NDP government shifted the burden for health care onto employers with the elimination of the Medical Services Plan (MSP) premiums and the implementation of a new health care payroll tax that will add $4 billion to the cost of business in B.C. over the two-year period from 2022 to 2024.

As a result of the pandemic, the NDP government also implemented five days of mandatory paid sick leave for all employers in B.C. Depending on uptake, this is expected to cost B.C. businesses an additional $506 million to $1.1 billion. Increases to corporate income taxes add another $1.6 billion. B.C. businesses also have paid disproportionately higher carbon taxes than other jurisdictions.

Businesses did get a couple of breaks from the NDP government. One was the elimination of PST on electricity. The other was a reduction of the small business tax rate, to 2 per cent from 2.5 per cent. 

Those two measures reduced business costs by $873 million. But at the end of the day, all the other new taxes and measures means B.C. businesses will pay a total of $6.5 billion more over two years, between 2022 and 2024.

In addition to new or increased taxes, the NDP government also increased the minimum wage from $13.85 per hour in 2019 to $16.75 per hour in 2023 – a 17 per cent increase -- and implemented a new provincial holiday – the National Day for Truth and Reconciliation. GVBOT estimates the cost to employers of paying for a new provincial holiday to be $200 million a year.

To offset the higher cost of doing business in B.C., GVBOT is lobbying the provincial government for the following tax reforms:

  • increase the Employer Health Tax threshold for small and medium-sized business;
  • exempt PST on business inputs like software and equipment; and
  • put carbon-tax revenues into local tech and emissions-reduction efforts

"To foster economic growth and stimulate investment in British Columbia, the provincial government must take action to alleviate the burden on businesses,” Anderson said. "By implementing these recommended measures, we can create a more competitive and attractive business climate that encourages innovation, entrepreneurship, and economic prosperity."

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