B.C. should consider exempting all business inputs from PST, among other tax reforms, if it wants to avoid negative economic impacts from losing the HST.
That’s the message the Fraser Institute is pitching in a report submitted to the B.C. Expert Panel on Business Taxation.
Charles Lammam, one of the report authors, argues that the PST is “one of the most detrimental forms of taxation” because it drives up the cost of investing in the province.
Lammam also states that, with the return of the PST, B.C. will have one of the highest overall tax rates on investment in Canada, putting B.C. at a disadvantage when compared with competitors such as Alberta, Saskatchewan and Ontario.
Lammam’s submission to the expert panel recommends that B.C.:
- introduce a complete sales tax exemption on all business inputs, especially machinery, equipment and new technologies;
- reduce the general corporate income tax rate to eight percent from its current 10%, through a phased-in reduction;
- reduce the disincentive for small business to grow by increasing the threshold of income eligible for the preferential small business tax rate of 2.5% to 1 million from $500,000;
- equalize property tax rates across business classes; and
- reduce the province’s middle and top marginal income tax rates to make them competitive with Alberta.
“If the government wants to provide more opportunities for families to prosper, it should consider tax reforms that will reduce the PST’s negative impact, make B.C. a better place for investors to set up operations or expand and enable the province to better attract and retain highly-skilled workers,” Lamman said.
