British Columbia’s Business Temptation: An Opaque Array of Tax Breaks
VANCOUVER, British Columbia — British Columbia is well known for its spectacular landscape and outdoorsy living, its swanky urban real estate and bouillabaisse of cultures.
A fact not so well known? It has a sweet deal for businesses, offering them tax breaks in an unusually opaque arrangement.
Like many places, British Columbia set up a system of tax incentives to lure businesses to the far western Canadian province in the hopes of creating jobs and transforming Vancouver into a global financial center.
But if the program has been good for business, it’s been less beneficial for British Columbia.
Participating companies have created few jobs, according to government figures, while more than 140 million Canadian dollars ($106 million) have been doled out in tax refunds since 2008, when the initiative was expanded.
The incentives operate under a cloak of secrecy that is unusual for similar efforts in Canada and the United States, critics say. The province will not name the companies that get the breaks. The only information available about them is on the website of a nonprofit that promotes the program.
“This is essentially a temporary foreign-worker program for the rich, with secret government subsidies for multinational corporations,” said Dermod Travis, the executive director of IntegrityBC, a nonpartisan political watchdog group based in Victoria, the provincial capital. “The government is selling B.C. as a tax haven for the global elite to park investment here, but not have to contribute.”
The provincial Ministry of Finance, which runs the effort, says it is a success, with 82 companies participating. Jamie Edwardson, a spokesman for the ministry, declined in an email to identify those companies or discuss the amount of refunds each has received, citing a ban on publicly disclosing taxpayer information in the law that created the incentives. He said the law protects taxpayer privacy.
At one point, the tax breaks were projected to create more than 13,000 jobs in British Columbia. According to ministry figures, though, fewer than 300 have been created as a result of the program, and possibly as few as 122.
To illustrate the plan’s success, Mr. Edwardson pointed to decade-old data in a consultant’s 2009 economic analysis, which estimated that between 2001 and 2007, the additional investment added anywhere from 124 million to 141 million Canadian dollars — between $91 million and $103 million — to the economy. Mr. Edwardson said these figures were the most recent available.
Experts say that with few public details, it is hard to tell whether the plan is worth the lost tax revenue. They also say the lack of disclosure prevents the public from knowing if companies are using the province as a pit stop on a global quest to avoid taxation. “There’s a real concern corporations are just stripping money out of places,” said Michael Knoll, a law professor and a director at the University of Pennsylvania Law School Center for Tax Law and Policy. “This lack of transparency is aiding that process.”
The secrecy is unusual, experts say. A comparable tax-incentive plan in Montreal makes more information public, records show, including the names of participants.
In the United States, it is standard practice for state governments to release the names of companies receiving targeted tax breaks, including credits and rebates. Most states also share other information about participants that British Columbia does not, like the amount of money each company has invested and where that investment has gone, along with what the state has received in return, said Greg LeRoy, the executive director of Good Jobs First, an American nonprofit that tracks state tax-break programs.
The International Business Activity Act, initially passed in 1988, allows companies to claim a refund of up to 100 percent of their provincial corporate income taxes on a number of business activities, including lending, foreign exchange trading and investment management, which could bring a company’s tax rate down to 15 percent.
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https://www.nytimes.com/2017/05/02/world...-an-opaque-array-of-tax-breaks.html?_r=1
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