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GRupdate
Beyond Numbers · April 2001

by Craig Fitzsimmons, Manager of Public Affairs

Growing the Debt, Not the Economy After attending the BC budget lock-up on March 15, 2001, the Institute issued a news release to the provincial media, in which it argued that the 2001 budget ignored fiscal and economic realities by dramatically increasing spending at a time of slowing economic growth. In response to the government increasing the total provincial debt by $850 million while ignoring concerns about competitiveness and sustainability, Institute CEO Richard Rees, FCA, said: “The government has decided to grow the debt rather than grow the economy, and that’s not fiscally responsible.”The Institute also stated that the government has used a one-time change in pension administration to show a surplus for 2001/2002, but that, in reality, the entire surplus was a paper transaction and no money was actually available to spend. The $1.4 billion transaction was technically correct, but it did not provide any funds to the government.

The Institute warned that the government’s economic growth projection of 2.4 per cent appears overly optimistic, noting the fact that Scotiabank economists have downgraded their forecast to just 1.7 per cent growth for BC, and that economic news out of the US continues to be on the downside. Yet, despite negative economic trends, the NDP government has used optimistic assumptions in the budget.

The Institute also expressed concern over the fact that the government has completely ignored the business tax reductions announced in Alberta and Ontario. Within a few years, both Alberta and Ontario will have a business tax rate of 8 per cent for businesses with taxable income over $400,000. In BC, the rate is 16.5 per cent, with no changes announced. For a firm with taxable income between $200,000 to $400,000, Alberta’s corporate income tax rate is set to drop to 3 per cent in 2004, while Ontario’s will be lowered to 4 per cent by 2005. Again, BC’s rate for a firm with the same taxable income is 16.5 per cent, and no changes have been announced.

“From 1994 to 1999, BC had a net loss of 469 corporate charters to other provinces, and the budget will do nothing to stop the exodus of corporations to other provinces from continuing” said Rees. “Nor will it stop BC’s professionals from fleeing the province.” To illustrate the problem, the ICABC pointed out that BC has already lost over 36,000 professionals to other provinces since 1998, notably to Alberta and Ontario.

Finally, the Institute expressed disappointment over the government’s continuing decision to ignore the Auditor General, the Enns Report, and the Chartered Accountants of BC by not including schools, universities, colleges and institutes, and health authorities (SUCH sector) in its financial reporting. Rees cautioned that the public accounts will likely continue to receive a qualification from the Auditor General for being incomplete.

In addition to Richard Rees, FCA, the Institute was represented at the budget lock-up by President Chuck Chandler, FCA; 1st Vice-President Robin Elliott, FCA, External Affairs Director Lesley MacGregor; and Manager of Public Affairs, Craig Fitzsimmons. Peter Stephen, CA, from Ernst & Young LLP in Vancouver, was in the media lock-up as a commentator for CBC Radio.

The budget news release is available on the Institute website at www.ica.bc.ca in both the Media and Government Affairs sections.

CAs Brought into the Tax Cut Debate

Both the BC government and the Opposition Liberals put out literature reviews on tax cuts prior to the budget. Predictably, both reviews came to very different conclusions on the impact of tax cuts, as the NDP stated that tax cuts cause revenue losses and jeopardize programs, while the Liberals claimed that tax cuts stimulate the economy and do not cause revenues to drop.

Notably, the Institute was cited by both political parties in their reviews. The BC government’s review referred to a study commissioned by the ICABC in 1999 as support for the revenue loss argument. Similarly, the Liberals quoted an opinion article by the Institute from the Victoria Times-Colonist that called for tax cuts.

What is the reality? The Institute has consistently advocated both business and personal tax cuts as a means of improving the province’s competitive position. Studies from 1999 are outdated because they do not account for the dramatic tax cuts announced for both Alberta and Ontario. The Institute’s opinion article on tax cuts is available on the ICABC website under CA Issues/News in the Budget category (“Cutting Taxes a Necessity, Not an Option for BC”).

NEW: Government Affairs added to the ICABC Website

Be sure to check out the new Government Affairs section of our website at www.ica.bc.ca for everything from news releases to the CA Public Policy Review newsletter, detailed below.

CA Public Policy Review

Published monthly by the Institute, the CA Public Policy Review newsletter provides an overview of recent policy announcements and reports. While it is available on the Institute’s website under Publications, members can also get the newsletter by email each month; simply email Craig Fitzsimmons at fitzsimm@ica.bc.ca to be added to the email distribution list.

The newsletter provides a summary of key legislation, policy announcements, and economic reports, and the electronic version includes links to the original source materials.

Get Recognition for Your Expertise

CAs wanted for media interviews

Enclosed with your ICABC mailing this month is a media contact form. If you would like to become a media commentator on any topic, please take a moment to fill out the form and return it to the Institute. We receive numerous calls from the media each month requesting interviews with chartered accountants from all regions of the province. Media interviews are an excellent way to get recognition for your expertise while promoting the CA profession.

The media contact form is also available in the Members Only section of the ICABC website at www.ica.bc.ca.

If you would like more information, please contact the Institute’s Manager of Public Affairs, Craig Fitzsimmons, at (604) 488-2625, toll free in BC at 1-800-663-2677, or by email at: fitzsimm@ica.bc.ca.