British Columbia Budget
The BC budget was presented on February 19, 2008. Its central feature is a proposed carbon tax on the purchase of fossil fuels which will take effect on July 1, 2008. The revenues collected by this new tax will be distributed back to British Columbians in the form of reductions in the personal tax rates, a new refundable tax credit for lower-income taxpayers and a one-time $100 Climate Action Dividend payment payable to all taxpayers who were residents of British Columbia on December 31, 2007.
As is discussed under the heading “Climate Action Dividend Payment,” below, all eligible taxpayers must file a 2006 or 2007 income tax return in order to get this payment automatically.
Carbon Tax
The new carbon tax will apply to the purchase or use in BC of fossil fuels such as gasoline, diesel fuel, natural gas, home heating fuel, propane and coal.
As of July 1, 2008, the tax rates for major fuel types will be:
- Gasoline 2.41 cents per litre;
- Diesel fuel 2.76 cents per litre;
- Natural gas 49.88 cents per gigajoule;
- Heating fuel oil 2.76 cents per litre;
- Canadian bituminous coal $20.79 per tonne; and
- Sub-bituminous coal $17.72 per tonne.
These rates will increase every July for the next four years based on their relative carbon dioxide equivalent (CO2e) emissions.
The cost of the carbon tax per family will depend on their consumption of the fuels in question. According to the government papers, a family of four driving a minivan and heating their home with natural gas will pay about $45 in 2008 and $118 in2009.
Personal Tax Cuts
The two lowest tax bracket rates will be reduced for 2008 and 2009. The table on the next page compares the rates before and after the budget announcement.
| Taxable Income* | 2008 (Before Budget) |
2008 (After Budget) |
2009 |
|---|---|---|---|
| 0 to $35,016 | 5.35% | 5.24% | 5.06% |
| $35,016 and $70,033 | 8.15% | 7.98% | 7.70% |
| $70,033 and $80,406 | 10.50% | 10.50% | 10.50% |
| $80,406 to $97,636 | 12.29% | 12.29% | 12.29% |
| Over $97,636 | 14.70% | 14.70% | 14.70% |
| *The income thresholds will be indexed for 2009 and subsequent years. | |||
Low Income Climate Action Tax Credit
Effective July 2008, a new Low-income Climate Action Tax Credit will be introduced to help lower-income taxpayers pay the new carbon tax. It will be paid separately from the tax return with the Goods and Services Tax Credit cheque. The first payments will be made in October 2008 and will include the amount for July 2008.
The maximum annual credit is calculated as $100 per adult plus $30 per child, with single parent families receiving $100 for their first child. This will be reduced by 2% of the prior-year net family income in excess of $30,000 for single taxpayers and $35,000 for families.
For 2009, the maximum tax credit amounts will increase by 5% to $105 per adult and $31.50 per child. The income thresholds will be indexed to inflation.
One-time Climate Action Dividend Payment
A one-time climate action dividend payment of $100 will be paid to each British Columbian who was at least 18 years of age and resident in the province on December 31, 2007. Parents will receive an additional $100 for each child who was under the age of 18 on December 31, 2007. Taxpayers who were incarcerated for a period of 90 days or more that includes January 1, 2008 will not be eligible for the payment.
In order to get the credit automatically, taxpayers must have filed a 2006 or 2007 tax return as a resident of British Columbia. Payments will continue to be made as eligible British Columbians file their income tax returns. To receive a payment, individuals must file an income tax return or notify the province of their eligibility no later than August 31, 2010. It would appear that children will have to be registered for the Canada Child Tax Benefit in order for parents to receive the payment for children under the age of 18.
The purpose of this payment is to help British Columbians make life-style changes to reduce their use of fossil fuels. However, there is no requirement that theyactually put it to this use.
Dividend Tax Credit Changes
Effective for 2009, the dividend tax credit rate for enhanced dividends will be reduced from 12% to 11% and the dividend tax credit for ordinary dividends will be reduced from 5.1% to 4.2%.
Corporate Tax Changes
Effective July 1, 2008, the small business corporate income tax rate will be reduced from 4.5% to 3.5%.
The general corporate income tax rate will be reduced from 12% to 11% effective the same date.
Provincial Sales Tax Changes
A number of changes are being made to the Social Services Tax Act to provide reductions or exemptions for energy-efficient products. In particular, a point-of-sale tax reduction will be provided for the purchase or lease of new conventional fuel efficient vehicles that meet the fuel efficiency criteria set out in the federal government's ecoAUTO rebate program (discussed on page 1.15 of the Tax Update). www.sbr.gov.bc.ca/pstreview/StatAndPolChanges.htm
