Tax cuts and rate freezes in the 1996 budget mean many British
Columbia families will be paying up to $700 less in taxes. And
small businesses that create jobs will receive tax cuts of $29
Total savings will be $485 million in 1998/99 when the full impact
of the changes is felt. The provincial government has made these tax cuts and rate freezes possible by cutting the size and cost of government. Now it is
returning these savings to the public, as well as protecting health
care and education.
|Single Parent with two young children $30,000 family income||Two Parent family with two children* $55,000 family income|
|Immediate 1996 Savings||Full Year Savings||Immediate 1996 Savings||Full Year Savings|
|Income Tax Cut||$14||$57||$32||$128|
|ICBC Rate Freeze||$30||$70||$30||$70|
|BC Hydro Rate Freeze||$15||$20||$15||$20|
|University/College Tuition Freeze||-||-||$276||$276|
|* Both children attending university|
These tax cuts ensure that British Columbia families will continue to pay the second lowest taxes in the country (see Table G3 for details).
Cutting Taxes for British Columbia Families
Budget '96 responds to the priorities of British Columbia families
by cutting some taxes and freezing other taxes and rates. The
tax reductions are described in more detail below, but include
a two point reduction in the personal income tax, which is capped for high income taxpayers earning more than $80,000 in order to direct the savings to working, middle-class families.
These tax cuts are in addition to the recently introduced Family
Bonus - a monthly cheque of up to $103 per child to help working
families raise their children and make work a better deal than
welfare. The tax cuts are also in addition to rate freezes announced
recently by the Premier:
Cutting Taxes for Small Business
Small businesses play a key role in job creation and economic development. Recognizing this, Budget '96 has targeted tax cuts to small businesses, rather than corporate tax breaks for banks and big business:
These cuts will reduce taxes for small business by $29 million
|Income Tax Act|
|British Columbia personal income tax rate reduced by two percentage points: one point effective July 1, 1996 and a further point effective next July. The reduction will be capped for taxpayers with taxable incomes in excess of approximately $80,000||1996 and subsequent tax years||(68)||(155)|
|Small business corporate income tax rate reduced one point to 9 per cent from 10 per cent effective July 1, 996.
No change to general corporate tax rate
|July 1, 1996||(18)||(24)|
|Two-year corporate income tax holiday introduced for eligible new small businesses incorporated after budget day; applicable to income which qualifies for the small business rate||May 1, 1996||(2)||(5)|
|Property Transfer Tax Act|
|Maximum fair market value of properties eligible for the First-Time Home Buyers' Exemption increased||May 1, 1996||(2)||(2)|
|Social Service Tax Act
|Exemption introduced for eligible purchases of tangible personal property incorporated into prototypes||May 1, 1996||(1)||(1)|
|Home Owner Grant Act|
|Home owner grant reduction threshold increased to $525,000||1996 tax year||(5)||(5)|
|Average gross school taxes are maintained at 1995 levels by adjusting school property tax rates in response to changes in assessed values||1996 tax year||-||-|
|Taxation (Rural Area) Act|
|Average gross taxes are maintained at 1995 levels by adjusting the residential rural area tax rate in response to changes in assessed values||1996 tax year||-||-|
|Revenue Dedicated to BC Transportation Financing Authority|
|Motor Fuel Tax Act|
|Additional 1 cent per litre of the clear fuel tax transferred to BC Transportation Financing Authority. No increase in overall fuel tax rates||March 31, 1996||-||-|
The British Columbia personal income tax rate, calculated as a
percentage of basic federal tax, is decreased by one percentage
point effective July 1, 1996 and a further percentage point effective
next July. These changes will lower the rate to 50.5 per cent
from 52.5 per cent of basic federal tax.
The reduction will be capped for taxpayers paying the second tier
surtax which is reached at taxable income of approximately $80,000.
The following table shows the impact of the reductions on taxpayers.
The changes are for a single individual with employment income
claiming basic tax credits.
|Annual Taxable Income||Total Annual B.C. Income Taxes Before Changes||1996|
Effective July 1, 1996 the small business income tax rate for
Canadian-controlled private corporations is reduced one point
to 9 per cent from 10 per cent. There is no change to the general
corporate rate. The small business tax rate reduction will benefit
about 40,000 small businesses in British Columbia.
A two-year corporate income tax holiday is introduced for eligible
new small businesses incorporated on or after May 1, 1996 and
on or before March 31, 2001. The tax holiday is only applicable
to income that qualifies for the small business income tax rate.
Targeting the benefit at new small businesses will complement
the small business rate reduction and stimulate job creation in
the province. To ensure the benefits are directed toward new
business with the greatest potential for creating jobs, the following
corporations are excluded from the tax holiday:
PROPERTY TRANSFER TAX ACT
Effective May 1, 1996, the fair market value of eligible residential
property under the First-Time Home Buyers' Exemption Program is
increased from $250,000 to $275,000 in the Greater Vancouver Regional
District, the Central Fraser Valley Regional District, the Dewdney-Alouette
Regional District, the Fraser-Cheam Regional District and the
Capital Regional District; and from $200,000 to $225,000 in the
rest of the province.
First-time home buyers are individuals who:
Eligible residential properties must be acquired for and used
as the purchaser's principal residence for at least one year following
the application for exemption.
SOCIAL SERVICE TAX ACT
Effective May 1, 1996, an exemption is provided for eligible purchases
of tangible personal property incorporated into prototypes. Prior
to this amendment, materials and parts incorporated into prototypes
as part of a research and development program were taxable unless
the prototype was subsequently sold.
HOME OWNER GRANT ACT
Effective for the 1996 taxation year, the home owner grant phase-out
threshold is increased to $525,000 from $475,000. The grant will
be phased out at the rate of $10 of grant for each $1,000 of assessed
value in excess of $525,000. As a result, the grant will be eliminated
for most homeowners having a home assessed at more than $572,000.
For homeowners who are seniors, handicapped or recipients of war
veterans allowances, the grant will be eliminated for homes assessed
in excess of $599,500. Setting the threshold at $525,000 means that
roughly 96 per cent of homeowners will not be affected by the
Effective for the 1996 taxation year, average gross school taxes
are maintained at 1995 levels by adjusting school property tax
rates in response to changes in assessed values.
Even with the freeze on average tax levels, there will be some
changes to individual tax bills. Because changes in individual
property values deviate from the average, some property owners
will experience an increase in their school tax, while others
will experience a reduction. Similar shifts will occur within
the non-residential property classes.
TAXATION (RURAL AREA) ACT
Effective for the 1996 taxation year, average gross taxes are
maintained at 1995 levels by adjusting the residential rural area
tax rate in response to changes in assessed values. Because changes
in individual property values deviate from the average, some property
owners will experience an increase in their rural area levy, while
others will experience a reduction.
MOTOR FUEL TAX ACT
Effective March 31, 1996, an additional 1 cent per litre of the
clear gasoline and diesel fuel tax is transferred to the BC Transportation
Financing Authority (BCTFA). The additional 1 cent per litre
is expected to generate approximately $55 million in revenue for
the BCTFA to help finance priority transportation projects. There
is no change to the total fuel tax rate paid by consumers.
|Social Service Tax Act|
|List of items that can be purchased exempt by bona fide farmers updated and expanded||May 1, 1996|
|Energy conservation exemption expanded to include qualifying polystyrene insulation forming blocks||May 1, 1996|
|List of exempt safety equipment expanded||May 1, 1996|
|List of exempt items used in the printing process expanded to include blankets||May 1, 1996|
|Exemption for articulating beds expanded||May 1, 1996|
|Exemption for transfers of custom software between related corporations clarified||May 1, 1996|
|Motor Fuel Tax Act|
|Partial refund provided for fuel used to operate hydraulic arms mounted on logging trucks||May 1, 1996|
|Property Transfer Tax Act|
|Value-splitting by associated corporations restricted||May 1, 1996|
|Certain airport improvements exempted from property tax to remove impediment to transfers of airports to local control||1994 tax year|
SOCIAL SERVICE TAX ACT
The following are added to the list of items that can be purchased
exempt from the provincial sales tax by bona fide farmers
for farm purposes.
Effective May 1, 1996:
Certain materials used primarily to prevent heat loss from buildings,
including rigid and semirigid polystyrene insulation attached
to the outside of buildings, are exempt from provincial sales
tax. Materials that primarily serve a structural or decorative
function are taxable, even if they also prevent heat loss from
Effective May 1, 1996, the exemption is expanded to include qualifying
polystyrene forming blocks. Qualifying polystyrene forming blocks
are composed of rigid polystyrene, sometimes reinforced with plastic
or steel, which initially serve as forms for concrete, but remain
permanently attached to the concrete to serve as the primary insulation
to prevent heat loss from the completed building.
Effective May 1, 1996, the following are added to the list of items which can be purchased exempt from tax as safety equipment:
An exemption is currently provided for prescribed materials when
purchased or leased by printers and publishers for their own use
in the printing process. In this process, an image of the product
to he printed is etched on a plate. This plate is then attached
to a cylinder to accept ink from ink rollers. Another cylinder,
with a blanket attached, takes the ink from the plates and transfers
it to the product being printed. The blanket is currently subject
Effective May 1, 1996, the exemption for items purchased or leased
by printers and publishers for their own use is expanded to include
blankets used in the printing process to transfer ink to the product
An exemption is currently provided for certain equipment designed
solely for the use of persons with a permanent disability or handicap.
Articulating beds that move the head or foot area up and down
and reposition an individual sideways to relieve bed sores currently
qualify for exemption. Effective May 1, 1996, articulating beds
that simply move the head/torso and leg/ foot areas up and down,
like a standard hospital bed, are eligible for exemption on the
prescription of a physician.
Effective May 1, 1996, the exemption for transfers of tangible
personal property between related corporations is clarified to
include transfers of software that was not taxable at the time
of acquisition because it was custom built or custom modified.
MOTOR FUEL TAX ACT
A refund of tax equal to the difference between the tax rate on
clear and coloured fuel is currently provided for that portion
of clear fuel used in the engine of a stationary motor vehicle
to operate a mobile crane. The refund does not currently apply
to hydraulic lifts mounted on logging trucks which in recent years
have replaced cranes in the logging industry. Effective May 1,
1996, the partial refund is extended to hydraulic lifts mounted
on logging trucks.
PROPERTY TRANSFER TAX ACT
Property transfer tax is imposed on application to register a
transfer of an interest in land in the land title system at a
rate of 1 per cent of the first $200,000 of fair market value,
and 2 per cent on the balance.
An exemption is currently provided under the Property Transfer
Tax Act for statutory amalgamations. This exemption has been
used recently by associated corporations to avoid the higher 2
per cent rate of tax on values in excess of $200,000. The avoidance
has been achieved by creating numerous associated corporations,
each of which purchases a $200,000 interest in the same property,
and then amalgamating the associated corporations exempt from
tax. Effective May 1, 1996, the act is amended to impose tax
on the aggregated value of all partial interests in the same land
purchased by associated corporations within a six-month period.
This provision parallels an existing provision which restricts
value-splitting by related individuals.
Under its National Airport Policy the federal government is attempting
to transfer the operation of airports to local control - in the
case of major airports, to local airport authorities, and in the
case of local/regional airports, to local governments. In British
Columbia the federal policy affects about 30 airports.
When the federal government operates airports it pays grants in
lieu of property tax, but does not pay grants on the value of
certain airport improvements such as paved runways, taxiways and
airport navigation aids (e.g., runway lights and unenclosed communication
Under current provincial legislation the transfer of an airport
to an airport authority or any other taxable operator results
in the imposition of property tax on the value of all improvements,
including those not subject to federal grants. The result is
that taxable airport operators face a significant increase in
their property tax liability, which is a major impediment to the
transfer of airports to local control.
In order to remove this impediment, effective for the 1994 taxation year, legislative authority is provided
to exempt prescribed airport improvements at prescribed community airports. The improvements to be prescribed closely parallel the improvements on which the federal government does not pay grants in lieu. As a result,
airport operators will be relieved of a significant increase in
their tax liability and taxing authorities' revenues should be
unaffected. Legislative authority is provided retroactive to
the 1994 taxation year to allow the removal of the additional
tax liability on improvements at airports which were transferred
to taxable operators over the last two years
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