VICTORIA - British Columbia is feeling the effect of continued global economic uncertainty, and the Province will need to exercise continued fiscal discipline in order to balance the budget by 2013-14, Finance Minister Kevin Falcon said with the release of the Second Quarterly Report.
The Province's projected deficit for 2011-12 has deteriorated by $313 million since the First Quarterly Report, rising to $3.1 billion. B.C. will continue to maintain a forecast allowance of $350 million as a buffer against future economic and fiscal risks.
The forecast reflects a $303-million decrease in revenue, mainly due to lower corporate income tax revenues, the impact of lower commodity prices on natural resource revenue, and reduced net income projections from commercial Crown corporations.
The Province's projected spending in 2011-12 includes $30 million in additional statutory emergency program flood-related costs, partially offset by a net $20 million reduction in operating expenses. Government continues to face significant spending pressures that ministries and agencies will work to manage within existing budgets, with additional funding from contingencies if necessary.
The Second Quarterly Report expense and revenue figures also reflect a change in accounting treatment for the final HST transition funding received from the federal government. The final $580-million payment received July 1, 2011, will be reflected as an expense rather than a reduction in revenue. This change has no effect on the deficit.
At $7.4 billion, total capital spending is forecast to be $289 million lower than forecast in the First Quarterly Report, reflecting construction schedule changes to health-facility projects and the re-prioritization of BC Hydro capital spending in light of the June 2011 review.
Taxpayer-supported debt forecast stands at $36.5 billion and is $351 million lower than the projection in the First Quarterly Report, as improved working capital management and lower capital spending projections reduced borrowing requirements. The lower debt combined with Statistics Canada's revisions to the B.C. 2010 GDP reduced the taxpayer-supported debt to GDP ratio by 0.3 percentage points from the First Quarterly Report to 17.2 per cent.
British Columbia's 2011-12 Second Quarterly Report is available online at: www.gov.bc.ca/fin
A backgrounder follows on the timeline for the transition back to the PST.
Ministry of Finance
Nov. 28, 2011 Ministry of Finance
PST Transition Update
Target timeline is unchanged
As the Independent Panel reported publicly in May, it takes 18 to 24 months to make the transition back to the PST. An action plan has been established to ensure an effective and orderly transition to the PST. The Province is working with the federal government to develop transition rules and to make any necessary changes to systems and processes. The Province will re-establish its capacity to administer the tax in the areas of registration and close of business, field and desk audit, appeals, rulings, provincial tax information phone lines, billings and remittances, collections and refunds. This will include staffing, facilities and equipment, and staff training to administer the PST and related taxes. We will register approximately 100,000 businesses as tax collectors before the PST is re-implemented and provide information and training on the tax application, collection, compliance and reporting rules related to the PST.
Progress so far
Discussions with Canada on transition rules and the return of $1.6 billion in transition funding are underway. The Province is reviewing the old PST legislation to identify possible administrative improvements. The Province has entered a contract to re-implement PST on the most current version of the software used for tax administration. Initial discussions have been held with the Canada Revenue Agency regarding plans for winding down the HST and re-implementing PST. Discussions regarding staffing will follow. A communications plan is being developed to assist businesses with information, registration and training. A website has also been developed to provide quarterly public updates: www.fin.gov.bc.ca/pst-return.htm
Transition rules - working with stakeholders
The Ministry of Finance has met with a number of industry associations and stakeholders to discuss their suggestions for improving the PST and issues related to the transition period and transition rules. The Province is working closely with the Government of Canada on transition rules for the housing sector and general transition rules and expects to announce the rules in the coming months.
The Expert Panel will be named shortly and will begin its work identifying efficiencies to the existing PST system. The panel will develop recommendations to simplify and streamline the sales tax system to reduce administration for government and business.
Ministry of Finance