Jock Finlayson

Jock Finlayson

FINLAYSON: Where does the money come from? The B.C. government’s top revenue sources

Governments around the world have taken on mountains of debt during the pandemic to support the economy

The recent unveiling of new social and business restrictions by the Provincial Health Officer is a stark reminder that the COVID-19 saga is far from over, notwithstanding the arrival of vaccines. It is likely to take a few more months – at least – before life returns to something resembling normal. In the meantime, British Columbians will gain fresh insight into the state of the province’s economy and public finances when Finance Minister Selina Robinson tables the NDP government’s 2021 budget on April 20.

Governments around the world have taken on mountains of debt during the pandemic to support economic activity. B.C. is no exception, and the forthcoming budget will tally up the fiscal damage done to date. At last count, the province’s operating deficit for 2020-21 was on course to reach a record $13 billion, according to the Ministry of Finance. All of this sizable sum will need to be borrowed. The government didn’t expect a gusher of red ink when the previous budget was released in February 2020.

The return of big deficits highlights an important issue: apart from running deficits, which in B.C. were eliminated in the years leading up to 2020, where does the provincial government get the money to pay for services and programs? To answer this question, we look back at the most recent pre-COVID budget year, which ended on March 31, 2020.

In that year, the provincial government collected $58.7 billion from a mix of revenue sources. At a high level, the funds can be divided into two buckets. The first is “taxation revenues” derived from taxes paid by individuals and businesses. These include taxes on personal and business income, consumption, energy, alcohol and tobacco, property, real estate transactions, and much else besides. Taxes provided 57 per cent of the province’s revenues in 2019-20.

The rest came from “non-taxation revenues.” They consist of cash transfers to B.C. from the federal government, the net earnings of provincial Crown Corporations, natural resource royalties, and a grab-bag of fees and charges.

Looking more closely at the data, the accompanying table shows the province’s main sources of revenue in 2019-20.

Personal income tax has long been the number one source of cash for the provincial government, supplying 18 per cent of revenues in 2019-20. Next was money transferred to B.C. by the federal government (16 per cent), B.C.’s sales tax (13 per cent), corporate income tax (9 per cent), and the combined net earnings of provincial Crown Corporations (5 per cent). Other significant revenue sources are fees paid to education institutions, taxes on property and property transactions, direct natural resource royalties, the Employers’ Health Tax, and carbon and other fuel taxes. Added together, the top five revenue sources accounted for almost three fifths of the funds available to the B.C. government before the arrival of COVID-19.

Many of the revenue sources in the table have been dampened by disruptions caused by the pandemic. That’s a principal reason why the province will be posting a record deficit in 2020-21. However, most of the affected revenue streams have been rebounding since the summer and should continue to revive in 2021-22. This will narrow the size of the government’s annual deficit. But given the magnitude of the COVID hit to our economy, it will take time to return to a balanced provincial budget.

B.C.’s top revenue sources in 2020-21.

B.C.’s top revenue sources in 2020-21.

Restoring the economy to health is the best way to boost government revenues going forward. Indeed, fostering economic growth and job creation should be the primary focus of the 2021 provincial budget. The government should steer clear of tax and fee increases for now. If necessary, options for raising additional revenues can be considered once the economy has fully recovered from the epic COVID-19 shock.

Jock Finlayson is a senior policy advisor with the B.C. business council.

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The old Yount school in Youbou has stood empty for years, but now a group has plans to turn it into a mixed-use property with affordable housing and tourist services. (Submitted)
Group sets sights on tranforming old Yount school property in Youbou

School District 79 has already commenced a process to sell the school through a formal proposal call

North Cowicha to extend the time lines of its official community plan update. (File photo)
North Cowichan to extend time line of OCP review

Municipality also adds $55,000 to OCP budget

Cowichan Capitals’ Logan Rands digs for the puck along the boards in the Alberni Valley Bulldogs’ zone midway through the third period of their BC Hockey League game at the Alberni Valley Multiplex on Saturday, April 10, 2021. (SUSAN QUINN/ Alberni Valley News)
Cowichan Capitals pick up first two wins of BCHL season

Brockman, Moffatt both up to four goals on the year

A nearly four-hour standoff at an apartment complex on Cowichan Lake Road in Duncan ended peacefully on Wednesday, April 14. (Kevin Rothbauer/Citizen)
Standoff at Duncan apartment ends peacefully

Police surround building as homeowner held in apartment by adult son

B.C. Centre for Disease Control maps showing new COVID-19 cases by local health area for the week of April 4-10. (BCCDC image)
Parksville-Qualicum passes Nanaimo in new COVID-19 cases

Greater Victoria had more new cases than any other Island area: B.C. Centre for Disease Control

A woman wears a protective face covering to help prevent the spread of COVID-19 as she walks past the emergency entrance of Vancouver General Hospital in Vancouver, B.C., Friday, April 9, 2021. COVID-19 cases have been on a steady increase in the province of British Columbia over the past week. THE CANADIAN PRESS/Jonathan Hayward
Top doctor warns B.C.’s daily cases could reach 3,000 as COVID hospitalizations surge

There are more than 400 people in hospital, with 125 of them in ICU

Eight-year-old Piper and her family were raising money to help Guinevere, the bearded dragon, get a gynecological surgery. Sadly, the reptile didn’t survive the procedure. (Jackee Sullivan/Special to Langley Advance Times)
Lizard fails to survive surgery, GoFundMe dollars help Langley family offset medical bills

Guinevere, a pet bearded dragon, underwent an ovariectomy on Tuesday

A driver stopped by Saanich police following a road rage incident on April 15 was found to be impaired, in violation of a license restriction and in a damaged vehicle. They received a 90-day driving prohibition and a 30-day vehicle impound. (Saanich Police Traffic Safety Unit/Twitter)
Road rager fails breathalyzer on busy B.C. highway in vehicle he shouldn’t be driving

Saanich police say man was operating vehicle without required ignition lock

The family of Iris McNeil, shown here with members of her family, has launched a petition to deny parole for the man who murdered McNeil in 1997. (Family photo)
Family fights killer’s release from Vancouver Island prison

Shortreed serving an indeterminate sentence at William Head Institution

B.C. Premier John Horgan wears a protective face mask to help prevent the spread of COVID-19. THE CANADIAN PRESS/Jonathan Hayward
B.C. Premier John Horgan booked to get AstraZeneca shot Friday

‘Let’s show all British Columbians that the best vaccine is the one that’s available to you now,’ he said

Doses of the Moderna COVID‑19 vaccine in a freezer trailer, to be transported to Canada during the COVID-19 pandemic. THE CANADIAN PRESS/Nathan Denette
Canada’s incoming supply of Moderna vaccine slashed in half through end of April

Moderna plans to ship 650,000 doses of its vaccine to Canada by the end of the month, instead of the expected 1.2 million

Dr. Bonnie Henry speaks about the province’s COVID-19 vaccine plans during a news conference at the legislature in Victoria. THE CANADIAN PRESS/Chad Hipolito
P.1 variant likely highest in B.C. due to more testing for it: Dr. Henry

Overall, just under 60% of new daily cases in the province involve variants

The father of Aaliyah Rosa planted a tree and laid a plaque in her memory in 2018. (Langley Advance Times files)
Final witness will extend Langley child murder trial into May or June

Lengthy trial began last autumn with COVID and other factors forcing it to take longer than expected

A crossing guard stops traffic as students wearing face masks to curb the spread of COVID-19 arrive at Ecole Woodward Hill Elementary School, in Surrey, B.C., on Tuesday, February 23, 2021. A number of schools in the Fraser Health region, including Woodward Hill, have reported cases of the B.1.7.7 COVID-19 variant first detected in the U.K. THE CANADIAN PRESS/Darryl Dyck
COVID-infected students in Lower Mainland schools transmitting to 1 to 2 others: data

Eight to 13 per cent of COVID cases among students in the Lower Mainland were acquired in schools, B.C. says

Most Read