2003/04 Annual Service Plan Report -- Ministry of Finance

Goal 2: Creating a tax and regulatory climate that stimulates economic growth

The Ministry of Finance plays a critical role in the development of a healthy investment climate in the province. Specifically, the ministry is responsible for delivering on the government's commitment to establish a competitive tax environment to support economic development and investment. Since 2001, the ministry has made significant progress in realizing this goal including:

cutting provincial personal income taxes by an average of 25 per cent
reducing the general corporate income tax rate by 18 per cent
introducing a provincial sales tax exemption for production machinery and equipment
eliminating the corporation capital tax for general corporations
several sector specific tax measures

Throughout the past year, the ministry has sustained these tax reductions and extended tax relief by:

introducing incentives for new media productions, and digital animation and special effects
expanding the province's venture capital tax credits
reducing the property tax rates paid by port operators to encourage new investment and secure future port expansion
eliminating the provincial sales tax on manufactured penstock equipment for small hydro-electric projects

In addition to the above tax cuts, targeted to increasing economic development and job growth, the ministry has continued to deliver on the New Era promise of having the lowest personal income tax rates in the country for the bottom two brackets.

Development of an economic climate that sustains growth also requires a systematic reduction in the number of regulatory requirements and red tape. Diminishing the regulatory burden makes it easier and more attractive for business to locate and invest in the province. The ministry played an important role in meeting government's deregulation commitment through passage of the new Business Corporations Act, which both streamlined existing requirements and provided more flexibility for business incorporations. Technology was also used to improve personal and corporate property registration services through the creation of several e-government solutions.

Goal 2: Creating a tax and regulatory climate that stimulates economic growth.

Objective 2.1: Establish a tax environment that encourages economic growth

The competitiveness of the taxation environment is a critical consideration for businesses and individuals in deciding whether to invest in the province. Jurisdictions with high tax regimes fail to attract or retain investment. As a result, their economic growth is limited and they forego the resulting additional revenues that sustain government services such as health and education.

Key Strategy	Core Business Area
1. Review the tax system on an ongoing basis and consider changes to maintain and improve competitiveness	Financial and Economic Performance and Analysis

Achievements

Reduced the property tax rates paid for ports, eliminated the provincial sales tax on manufactured penstock equipment for small hydro-electric projects and introduced new tax incentives for digital animation and new media.

Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance
Provincial ranking of personal income tax rates for the bottom two tax brackets	Lowest	Lowest	Lowest	Lowest	On Track
Selection Rationale: This performance measure stems from the Government's New Era commitment to cut the base personal income tax rate to the lowest rate of any province in Canada for the bottom two tax brackets on the first $60,000 of income. Keeping these tax rates low is consistent with the objective of maintaining a competitive tax system that encourages investment and innovation.

Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance
Provincial ranking of the top personal marginal tax rate	In the Lowest 2	In the Lowest 3	In the Lowest 3	In the Lowest 2	Exceeded target by one ranking
Selection Rationale: Comparison of provincial top marginal personal income tax rates is a key component in the decision-making processes of highly skilled individuals and investors, in choosing where to live, work and invest.

Objective 2.2: Support business development and investment

An important mechanism to promote investment and innovation in the province is the creation of an efficient and effective regulatory and policy framework. Unnecessary regulatory requirements increase the cost of doing business in the province resulting in wasted time and effort for both individuals and businesses. Alternatively, streamlined legislative and policy frameworks supported by the electronic delivery of services can achieve the same outcomes while acting as a driver for further business development and investment.

Key Strategy	Core Business Area
1. Streamline and update the legislative and policy frameworks to reduce regulatory requirements and enable the electronic delivery of services	Financial and Corporate Sector Services

Achievements

Over the course of the past year the ministry has made significant progress in updating the legislative frameworks for the financial and corporate sectors, including:

Passed and subsequently implemented the Business Corporations Act (March 2004) to replace the outdated Company Act. This legislation provides comprehensive rules for the creation and governance of British Columbia's corporations and represents the first significant update of corporate legislation since 1973.
Expanded online registration under the Business Corporations Act, Manufactured Home Act and Personal Property Security Act which will significantly enhance the efficiency and effectiveness of public access to, and use of, the registries. The amount of information required to be filed with the Registries has been reduced.
Enabled the creation of a new Financial Services Tribunal to hear appeals of decisions under the Financial Institutions Act, Credit Union Incorporation Act, Mortgage Brokers Act, Pension Benefits Standards Act and Real Estate Act.
Mandated the British Columbia Utilities Commission (BCUC) with responsibility and authority for independently regulating the basic insurance rates and service of the Insurance Corporation of British Columbia (ICBC).
Created a legislative framework to enhance competition for optional vehicle insurance products, such as collision and comprehensive insurance coverage, resulting in greater choice for consumers.
Four electronic registration systems were implemented, including Manufactured Homes Online, Corporate Online, BC Business Number Hub and OneStop Business Registration System offering improved access to services for clients, a reduction in unnecessary regulations and cost savings to government of more than $4 million over the coming years.

Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance
Number of regulatory requirements (2004/05 target is a 1/3 reduction from 2001/02 baseline)*	41,382	34,706 (–16%)	31,000 (–25%)	28,194 (–31.87%)	Exceeded the target by 6.87 percentage points
Selection Rationale: Regulatory burden is a key consideration for individuals and firms considering whether to invest in the province. Reducing red tape by eliminating unnecessary regulatory requirements improves the competitiveness of British Columbia's business environment and contributes to its economic growth. An important indicator of the overall regulatory burden on business is the number of regulatory requirements.


*	The regulatory baseline has been adjusted to reflect 1,075 additional regulatory requirements assumed from the Pension Benefits Standards Act and Public Sector Pension Plans Act.

Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance
Per cent annual growth in business registrations	1.7% (43,304)	12.6% (48,767)	5% (51,205)	5.4% (51,401)	Exceeded the target by 0.4 percentage points (196)
Selection Rationale: An increase in the number of businesses operating in the province is an indicator of the government's success in creating a tax and regulatory climate that stimulates economic growth.

Performance Measure	2001/02 Actual	2002/03 Actual	2003/04 Target	2003/04 Actual	2003/04 Variance
Percentage of company incorporations and registrations filed electronically	71%	77%	85%	84.1%	Shortfall of 0.9 percentage points
Selection Rationale: The transfer of paper-based company incorporations and registrations to electronic self-service over the Internet improves customer service at reduced costs. Registering parties are able to complete their transactions when they require them, pay for the service and obtain confirmation all in real time. Among the services offered electronically is the registration of business entities, encumbrances (liens) on personal property and ownership and location of manufactured homes in the province.
Variance: An underestimation of the Corporate Online system's complexity delayed its implementation by three months. This delay limited the time available for electronic incorporation and other corporate filings.