British Columbia -- Budget '99
Ministry of Finance and Corporate Relations
Joy K. MacPhail, Minister

Budget Reports
This electronic version is for informational purposes only.
The printed version remains the official version.

Report C:


Budget ’98 included a Three-Year Economic Plan designed to help British Columbia meet the challenges of an increasingly competitive global economy.

The plan was developed after extensive consultations with interest groups and initially included five key elements:

In mid-1998 an additional element was introduced to the plan:

This report provides an update on each component of the Three-Year Economic Plan along with information about new initiatives contained in Budget ’99.

Overall Tax Reductions

Tax cuts are a key part of the three-year economic plan. The cuts in the three-year plan — combined with the tax reductions announced earlier and those included in Budget ’99 — will result in total provincial reductions of $1 billion by 2001/02.

This includes two measures announced in this year's Budget — the expansion of the corporation capital tax holiday for new investment to four years from the current two years, and the reduction in the small business corporate income tax rate to 5.5 per cent from 8.5 per cent.

If the impact of recent federal income tax changes on provincial revenues are taken into account, the total value of the cuts rises to $1.2 billion.

Tax Cuts for Families and Individuals

On January 1, 1999, as announced in the 1998 budget, the provincial income tax was reduced to 49.5 per cent of federal tax from 50.5 per cent. In total, the provincial personal income tax rate has been reduced by six per cent since 1995. In addition, because provincial income taxes are based on federal taxes, the tax changes introduced in the federal budget will reduce the provincial income tax by a further two per cent starting on July 1, 1999.

REDUCTIONS ($ millions)

The combined impact of the tax cuts and rate freezes introduced since 1995 will be to reduce the taxes and costs for a single-parent family with two children and an annual income of $30,000 by about $1,200 annually.

When fully implemented, the tax changes introduced since 1995 will put over $500 million into the pockets of individuals and families in British Columbia.



Revitalizing Traditional Industries

British Columbia's traditional resource-based economy has generally been hit hard by the economic problems in Asia and the associated fall in commodity prices. Nevertheless, the resource industries remain one of the mainstays of British Columbia's economy. In areas outside the Lower Mainland, these industries will remain a primary source of economic well being.

The three-year plan included comprehensive measures to revitalize the resource sector. During the last year many of the steps necessary to assist in the recovery of these industries have been taken.

Oil and Gas

Since Budget ’98, the government has announced a series of steps to streamline the regulatory environment facing the oil and gas industry, improve local infrastructure and improve the competitiveness of the royalty system, including:


Consultations with the mining industry have resulted in a series of initiatives to increase certainty of access and tenure and to encourage new exploration activity:


The forest sector continues to face substantial challenges. However, working with the industry and local communities, the government has taken significant steps, including the recently announced Forest Action Plan, to create a more diversified and sustainable future for the forest sector. The major reforms include:

The overall impact of these initiatives will be to save the industry more than $700 million annually.


The long-term viability of the fishing industry will depend on a strong commitment to conservation, a diversified fishing fleet and greater value-added activities. To help meet these goals:


British Columbia has a comparative advantage in power production and boasts among the lowest electricity costs in North America. Hydro rates have been frozen since 1993 and in 1998 consumer and industrial customers received a one to two per cent rebate on their 1997 billings.

Two major initiatives are underway to spur regional development through the use of the province's energy resources:


The agriculture and food sector is growing and British Columbia producers are adopting innovative approaches to product development and marketing. The government has taken several steps to ensure the continued strength of the sector:

In addition to these sector specific initiatives, Budget ’99 extends the existing two-year capital tax holiday for new investments to four years for qualifying expenditures made after March 31, 1999. This will reduce costs for business by $20 million when it is fully phased in and will provide an immediate incentive for firms to improve their competitiveness by investing in new plant and equipment.

The impacts of the Asian Downturn and lower commodity prices are being felt most directly in regions outside the Lower Mainland, and particularly in small, resource-dependent, communities. While the Forest Action Plan and other initiatives to strengthen the resource sector will assist these communities, more needs to be done for those hardest hit by mill closures and layoffs.

The Premier's Regional Summits are helping to develop local economic strategies through partnerships between government, communities, First Nations and local business and workers. Three regional summits have already been held.

In the coming months, the government will be announcing new approaches to help boost British Columbia's regional economies and assist communities in transition.

Assistance for Small Business

The government is keenly aware of the role played by small business in creating new activity and jobs in the economy. To foster additional growth in this sector, the three-year plan included commitments to:

Budget ’99 expands on the commitments to reduce small business taxes by accelerating and deepening the cut in the small business corporate income tax rate. Effective July 1, 1999, the small business rate will fall to 5.5 per cent. This is below the rate in Alberta and will be the second lowest rate in the country. This additional cut will put an extra $63 million annually in the pockets of small business owners to help them expand their operations and create new jobs.

Knowledge-Based Economy

Knowledge-based economic activity, and the high-tech sector in particular, has been one of the fastest growing segments of the economy in recent years. The high-tech sector alone grew by 7.2 per cent annually between 1990 and 1996, while employment growth during the same period totalled 55 per cent.

Although the resource sector will continue to be important, particularly in the regions, the province's future economic prosperity depends increasingly on developing a highly skilled and adaptable work force and nurturing industries that rely on these skills to generate economic growth and jobs.

The government is taking a comprehensive approach to encouraging knowledge-based activity including improvements in the K-12 system, new post-secondary spaces, combined with easier access to the post-secondary system and tax reductions and other incentives to assist knowledge-based industries. The major initiatives in each area include:

Investing in Education

High Tech


Reducing Red Tape and Regulation

The three-year plan included a commitment to review government regulations with a view to reducing unnecessary red tape and paperwork, while protecting critical environmental and workplace standards.

To meet this commitment, the Minister of Finance and Corporate Relations created a 16-person Business Task Force, which included members from business, labour and government.

The Task Force received over 500 suggestions from more than 100 organizations. In response, a Bill was introduced in the 1998 legislative session to streamline 33 provincial statutes. In addition, several projects have been initiated to focus activity on priority areas identified by the Task Force, including:

A topic box in this report provides more details on the government's red tape and streamlining initiative.

Topic Box

Building Infrastructure

The availability of high quality public infrastructure such as schools, hospitals and public transportation can improve British Columbia's attractiveness as a place to work and live. In addition, maintaining the government's capital program through periods of economic uncertainty can ease the impacts of the downturn, provide alternative sources of employment for construction workers and offer cost saving opportunities.

In 1999/00, the government will spend $1.9 billion maintaining and expanding the province's infrastructure. The major priority projects include:

Additional details on the government's capital spending plans are provided in a topic box in this report.

Housing Incentives

In recent months, the impact of the economic downturn on the housing industry has become apparent. During most of the 1990s, residential construction was a source of considerable economic strength, primarily due to the influx of new residents to the province. Recently, however, despite significant improvements in affordability, on a per capita basis, housing starts have dropped to the lowest levels since the 1950s.

The current level of activity raises concerns about whether the industry will be able to quickly respond to future housing demands as the economy recovers.

To provide an immediate boost to the housing sector, government will announce incentives to increase residential construction activity. Details will be announced following consultations with the industry.

Summary of New Initiatives

The following is a brief summary of the new initiatives announced in Budget ’99 to augment the three-year economic plan.

  • Small Business — Effective July 1, 1999, the small business rate will fall to 5.5 per cent from 8.5 per cent. This will reduce taxes for small businesses by $63 million annually.
  • Corporation Capital Tax Holiday — the existing two-year capital tax holiday for new investments will be extended to four years for investments made after March 31, 1999. This will reduce costs for business by $20 million annually when it is fully phased in.
  • Research and Development — new incentives for research and development in the province will be introduced which will save industry up to $20 million annually. The details will be finalized after discussions with industry.
  • Housing — incentives will be developed to increase residential construction activity. Details will be released following consultations with the residential construction sector.


Topic Box
1999/2000 CAPITAL PLAN



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