B.C.’s recovery from the COVID-19 recession of 2020 showed up most dramatically in a $5.5 billion improvement in the provincial deficit reported in the province’s latest budget, after it had been forecast to be $13.6 billion last fall in the depths of the pandemic.
While natural resource income recovered and lumber prices soared, B.C. reaped its most significant gains from strong income taxes and a surge in real estate that neither the province nor its private sector advisory board saw coming.
“This $5.5 billion improvement is mainly thanks to higher revenues, but also somewhat lower spending and improved operating results in government organizations, including ICBC,” Finance Minister Selina Robinson said in her budget presentation April 20.
The budget estimates that property taxes to the province are $2.3 billion for the year ended March 31, rising to nearly $3 billion for 2021-22. Property transfer tax took in $2 billion last fiscal year and is forecast to decline slightly to $1.97 billion in the current year, as the finance ministry forecasts a “moderation in market activity in 2022.”
Monthly home sales reached record levels in late 2020 and have continued to grow in 2021, with high-wage employment “resilient” in the pandemic, low interest rates and demand for larger homes by remote workers, budget documents say.
Real estate sales rose in every B.C. region in 2020, with Greater Vancouver sales up 75 per cent, Okanagan Mainline almost doubling at 94.6 per cent, Fraser Valley up 110 per cent and Greater Victoria sales up 60 per cent.
“Meanwhile, the average home sale price in B.C. increased by 11.6 per cent in 2020 compared to 2019,” the budget documents say. “Strong average sale price growth was observed in most markets in the province. Year-to-date to February 2021, prices were up by 16.5 per cent compared to the same period a year earlier.”
ICBC net revenue is estimated at $709 million for the year just passed, dropping to $154 million next year as major reforms in injury payouts are to take effect.
Provincial tobacco taxes continue to soar effective July 1, rising from 29.5 cents to 32.5 cents on a single cigarette. Provincial sales tax also applies to vaping products as of April 1.
An exemption of B.C.’s seven per cent sales tax for sweetened carbonated drinks ended April 1, and the province also required foreign streaming services such as Netflix and Disney+ to pay sales tax along with domestic services like CraveTV.
B.C.’s carbon tax increased to 9.96 cents on a litre of gasoline as of April 1, with another increase scheduled for April 2022. In Metro Vancouver, gasoline taxes are now 36.96 cents per litre, including TransLink, motor fuel tax and carbon tax.
Natural gas royalties are forecast to pick up quickly, from $191 million to $286 million this year and $315 million in 2022-23 as B.C.’s first large-scale LNG export project nears completion. Forest revenues and the mineral tax on coal mines are rising, with a 14 per cent increase estimated for this year. That is expected to fall 6.1 per cent in 2022-23, based mostly on lumber prices declining from current high levels.