On March 2, the British Columbia government introduced its 2010 budget, and the federal government tabled theirs two days later.  Given the economic backdrop and the debt aversion shared by both governments, their respective budgets share a common approach: spending will be contained; cuts will be modest; there will be no tax hikes or cuts; and, each predicts that revenues will eventually grow and bring back balanced budgets. Both levels of government are counting on revenue growth exceeding spending growth to balance the books.  In the medium term, this leaves little room for major spending initiatives. The following are some highlights from both budgets as they are relevant to BCs technology sector.

Clean Energy Sector
BC’s clean energy technology sector continues to benefit from the provincial government’s commitment to build a green economy.  This is demonstrated through the earmarking of $100M over three years.  These funds will support three priority areas: clean transportation infrastructure; wood-based bio fuels; and, new forms of electricity generation.  While a portion of these funds will replace the Innovative Clean Energy Fund (ICE Fund), which is scheduled to wind down over the next three years, the budget did include incremental dollars, and signifies the province’s commitment to support a key growth area for the technology sector.

The BC Income Tax Act has been expanded to include tax relief through the International Financial Centre for certain qualifying international business activities in the areas of digital media distribution and publishing, clean technology, and carbon trading.  These new tax measures will increase the province’s ability to attract new business, investment and talent to British Columbia.  The budget also includes a tax credit for interactive digital media development labour costs, similar to the film production tax credits.  These efforts were introduced in an effort for the province to remain competitive with Ontario and Quebec.

Inter-Ministry Collaboration
The 2010 ministry service plans included in the provincial budget cite collaborative objectives between two ministries most relevant to BCs technology sector: Advanced Education and Labour Market Development (AELMD), and Small Business, Technology and Economic Development and Education (STED).  Objectives noted in the service plans include: the need to foster creativity, innovation and knowledge development; advancing a culture of science across the province; and increasing investment in research and development in BC.   The service plans, given the nature of the documents, don’t include details on how these objectives will be achieved.  However the BCTIA will remain actively engaged with the provincial government and will continue to make the case for a long term, strategic approach to the growth and development of BCs knowledge-based economy.

Federal Tax Measure: Section 116
After many years of advocacy by BCTIA and numerous other stakeholders, and after a false start in 2008, the federal government will finally remove one of the biggest barriers to foreign investment suffered by our sector, by limiting the application of Section 116 of the Federal Income Tax Act to real property related activities.

This change of Section 116 removes the withholding tax and all related administrative and bureaucratic burdens from foreign investors who realize a capital gain from an investment in a private technology company in Canada. Foreign investors are now able to invest in Canada and to realize their gains, which is critical for the attraction of foreign, notably US, capital into our industry.  Once this change has been enacted by parliament it will mean that investments after March 4, 2010 will fall under the new rule.

We are pleased the federal government has finally listened to organizations like BCTIA and others across Canada, who have for many years fervently advocated for this change.

Read what some of our member’s are saying about the 2010 federal and provincial budgets.