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The British Columbia 2009 budget was tabled on February 17, 2009. The global economy has affected our province and will lead us into our first deficit in five years.  The budget forecasts a deficit of $495 million for 2009/2010 and $245 million for 2010/2011.  The budget also provides for an investment of $14 billion in infrastructure around the province. This is estimated to generate employment for 88,000 people.

Tax Reductions

No changes to the personal or corporate tax rates were announced, however the rate changes announced in the October 22, 2008 Economic Plan were confirmed.  These changes are as follows:

·        Effective January 1, 2008, there will be a reduction to the two lowest personal tax bracket rates to 5.06% and 7.7%

·        A reduction to the small business rate from 3% to 2.5% as of December 1, 2008

·        A reduction to the corporate general rate to 10.5% for January 1, 2010 and 10% for January 1, 2011

·        Removal of expiry dates for film tax credits (Film Incentive B.C. and Productions Services Tax Credit)

·        Extension of Film Incentive B.C. tax credit to all Canadian-controlled corporations (previously only B.C. controlled corporations).  Productions that begin principal photography after December 31, 2008 are eligible for the credit.

·        Extension of the B.C. Mining Flow-through Share Tax Credit to the end of 2009.

Tax Adjustments

Dividend Tax Credit:

The provincial dividend tax credit rate on non-eligible dividends will be reduced from 4.2% to 3.4% effective January 1, 2010. The decrease in the credit is implemented to maintain integration between personal and corporate taxes due to the reduction in the small business rate from 3% to 2.5%. The effect is that there will be an increase to the personal rate on non-eligible dividends from 32.7% in 2009 to 33.7% in 2010 for people in the highest tax bracket.

B.C. Sales Tax Credit:

As of January 1, 2009, income from a Registered Disability Savings Plan is excluded from the calculation of eligibility for B.C. Sales Tax Credit and Medical Services Plan premium assistance.

Corporation Capital Tax Act:

Effective for taxation years ending after September 30, 2006, the capital tax base is amended to include accumulated other comprehensive income.  This income must be shown as a separate item on the corporation’s balance sheet.

International Financial Activity Act:

·        The 90 day amalgamation notification rule has been relaxed in that the commissioner will have discretion to accept late notifications

·        Effective April 1, 2009, the list of eligible patents is expanded to include patents relating to wastewater treatment and fuel cell technology

·        Effective September 1, 2004, the definition of a non-resident person excludes a business carried on in Canada by the non-resident.

Logging Tax:

For years ending after December 2008, there is a partial remission of the logging tax provided to corporations that cannot use the full amount of the credit.  This will allow small business corporations with logging income to benefit from the reduction in the small business rate reduction.

Social Services Tax Act:

The government has implemented various PST changes in the budget which are centered on expanded exemptions for ‘energy efficient equipment’.  Some of the changes are as follows:

·        Exemption for various ENERGY STAR qualified equipment extended to March 2011

·        Extended definition for production machinery and equipment exemption

·        New exemption for equipment to produce energy from oceans, currents, tides and waves

·        New temporary exemption for certain energy efficient heating equipment

·        Expanded exemption for various prescription drugs and vaccines listed in certain regulations under the Pharmacists, Pharmacy Operations and Drug Scheduling Act.

·        Bona fide farmer exemption expanded for certain cooling products acquired and used solely for farm purposes.

·        The phrase “at another person’s expense” will be clarified to capture tax on property or services paid for at another person’s expense.  This clarification is retroactive to January 1, 2000.

Motor Fuel Tax Act:

Effective February 18, 2009, hydrogen fuel will be exempted from motor fuel tax if the hydrogen is purchased for use in a fuel cell vehicle and is not produced by electrolysis using coal-generated electricity unless the carbon dioxide emitted as a result of the process is captured and stored, or captured and sequestered.

Tobacco Tax Act:

Effective February 18, 2009, there is an increase to tobacco tax rates as follows:

·        cigarettes increased to $37.00 per carton of 200 (from $35.80)

·        fine-cut tobacco increased to 18.5 cents per gram (from 17.9 cents).

Land Tax Deferment Act:

As announced on November 1, 2008, effective for the 2009 and 2010 taxation years, a temporary property tax deferment program is introduced to allow homeowners experiencing financial hardship and who have at least 15% equity in their home, to defer their property taxes until the sale of their home.  They may repay the deferred taxes earlier if they desire.

Home Owner Grant Act:

For the 2009 taxation year, the threshold for the phase-out of the home owner grant is maintained at the 2008 level of $1,050,000.  For properties valued above $1,050,000, the grant is reduced by $5 for every $1,000 of assessed value in excess of the threshold and eliminated for properties valued at $1,164,000 and above.

School Act:

·        For 2009, the average residential school property taxes before application of the home owner grant will increase by the 2008 provincial inflation rate

·        Non-residential school property tax rates will be set so that revenue will increase by the provincial rate of inflation plus the cost of new construction.

Taxation (Rural Area) Act:

·        For 2009, average residential rural area taxes will increase by the 2008 provincial tax rate.

·        Non-residential rural area tax rates will be set so that total revenue will increase by the provincial rate of inflation plus the cost of new construction.

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