Getting rid of B.C.’s provincial sales tax on machinery and equipment (M&E) purchases could boost investment by 17 per cent – or about $1.6 billion.
That’s according to a Tuesday report by the Canadian Federation of Independent Business (CFIB) that pointed to a drop in M&E investment as a share of B.C.’s economy, from 3.9 per cent in 2013 to 3.5 per cent in 2023.
It’s among the driving factors slowing down Canadian productivity, which has shown a decline in the last 15 of 18 quarters, added the report.
In 2022, Canada had the second lowest productivity level in GDP per hour worked among G7 countries at US$53 – above Japan and below Italy.
If one were to divide the total amount of private-sector dollar investment in M&E by the number of private-sector workers in B.C.’s workforce, average investment per worker has increased from $5,400 in 2013 to $5,500 in 2023.
This puts B.C. fourth lowest among provinces, tied with Ontario, in terms of average M&E investment per worker.
So what is driving this decline in investment?
Nearly two-thirds (65 per cent) of SMEs in the province cite the high cost of equipment as a major barrier, according to survey results included in the CFIB report.
Two out of five (40 per cent) also said the inability to write off PST on purchases is a major deciding factor when deciding to invest in M&E.
Among 330 B.C. small businesses surveyed in August 2024, 37 per cent said their capital purchases will stay the same over the next two years compared with the last two. About the same amount (35 per cent) are planning to decrease their purchases.
CFIB senior policy analyst Bradlee Whidden said in a statement B.C.'s PST creates a significant barrier to investment, explaining that exempting M&E purchases from the tax would reverse declining investment and boost productivity.
For the rest of Canada, the report also recommended reducing corporate income taxes and increasing transparency by ensuring all PST exemptions are listed.
The report outlines findings of CFIB's Your Voice survey conducted Aug. 8-20, 2024, with participation from 2,331 small business owners throughout the country. A probability sample with the same number of respondents would have a margin of error of plus or minus 2.03 per cent, 19 times out of 20.
