British Columbia will probably scrap plans to raise corporate taxes because better-than- forecast economic growth will help the provincial government balance its budget next year, Finance Minister Kevin Falcon said.
“I think it’s very unlikely” that we will raise the tax rate, Falcon said in an interview yesterday after addressing the Canadian Association of New York. “It will only happen if our own assumptions are not met. I think that is extremely unlikely.”
Signs of a U.S. economic recovery have convinced Falcon that growth in British Columbia’s economy this year will probably beat the 1.8 percent expansion he forecast in the Canadian province’s February budget.
The fiscal plan included the possibility of a one- percentage point increase in B.C.’s corporate tax rate to 11 percent as of April 1, 2014.
The U.S. economy “is showing more resilience that we anticipated and we think that means it’s very unlikely we’ll ever have to touch the corporate tax rate,” Falcon said. “I feel very good that we can outperform” on the economic forecast.
British Columbia anticipates a C$968 million ($964 million) budget shortfall in the year that began April 1, according to budget documents. The government’s blueprint projects a C$154 million surplus in the 2013-14 fiscal year and a C$250 million surplus the following year.
Falcon, whose ruling Liberal Party will face an election within about a year, said British Columbia will pay down debt and take steps to make its tax system more competitive once the budget is balanced.
“It may not just be tax levels, it may be other things that can stimulate investment,” he said in an interview at the Harvard Club of New York. “What else can we do to encourage investment and capital formation in British Columbia?”
Housing prices in British Columbia will drift “downward,” representing a welcome development in Canada’s westernmost province, Falcon said.
Prices for residential real estate in B.C., Canada’s third- most-populous province, may fall about 5 percent in the next 24 months, Falcon said.
“There will be some downward drift in the B.C. housing market and that won’t be an unhealthy thing,” Falcon said, adding that price speculation is not a significant feature in the province. Price declines “will not be dramatic, certainly nothing like we’ve seen in the U.S.”
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