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

Fifty-one improperly discarded needles were picked up from Vernon streets in four months as part of the Folks on Spokes program. (File)
85% fewer needles found around Vernon

Folks on Spokes numbers showing fewer improperly discarded sharps

In a feature article published April 10, 2021 in The Times of London, ‘headlined British Columbia has what it takes to rival Napa Valley,’ the valley is praised extensively for its natural beauty and wine. (File photo)
From the U.K. with love: Okanagan wine, scenery receives international praise

The Times of London newspaper recently featured the valley in a wine and travel piece

Skogie’s Express Tunnel Wash on Anderson Way in Vernon. (Submitted photo)
Lawsuit dismissed after vehicle damaged while inside Vernon car wash

Civil Resolution Tribunal dismisses driver’s claim following a collision inside Skogie’s car wash

FILE — In this March 31, 2021 file photo, a nurse fills a syringe with a dose of the Johnson & Johnson’s one-dose COVID-19 vaccine at the Vaxmobile, at the Uniondale Hempstead Senior Center, in Uniondale, N.Y. The U.S. is recommending a “pause” in administration of the single-dose Johnson & Johnson COVID-19 vaccine to investigate reports of potentially dangerous blood clots. In a joint statement Tuesday, the Centers for Disease Control and Prevention and the Food and Drug Administration said it was investigating clots in six women in the days after vaccination, in combination with reduced platelet counts. (AP Photo/Mary Altaffer, File)
72 new COVID-19 cases in Interior Health

This brings the total number of cases in the region to 9,666 since the pandemic began

Forward Elan Bar Lev Wise of the West Kelowna Warriors (right, shown playing for the Vernon Vipers in 2019) has been suspended nine games by the B.C. Hockey League for being the instigator and aggressor in an after-the-game fight with Vernon’s Kjell Kjemhus Monday, April 12, at Kal Tire Place. Kjemhus was given a two-game suspension for his role in the fight after the game was over. (Morning Star - file photo)
West Kelowna Warriors forward handed lengthy suspension

Elan Bar Lev Wise fought Vernon Vipers forward Kjell Kjemhus after BCHL game was over Monday, April 12; Kjemhus suspended two games

Restaurant patrons enjoy the weather on a patio in Vancouver, B.C., Monday, April 5, 2021. The province has restricted indoor dining at all restaurants in B.C. due to a spike in COVID-19 numbers. THE CANADIAN PRESS/Jonathan Hayward
B.C.’s COVID-19 indoor dining, drinking ban extending into May

Restaurant association says patio rules to be clarified

A dumpster was on fire behind a residential complex in downtown Penticton Tuesday afternoon. (Brennan Phillips Western News)
Dumpster fire extinguished in downtown Penticton

There has been a string of dumpster fires lately

The future of the Eagle Pass Lookout cabin is being discussed. (File photo)
Options presented for future of former Eagle Pass fire lookout in Shuswap

Stakeholders met in 2020 to discuss the restoration, or possible removal of the cabin

(Mayor Cindy Fortin - Peachland)
Peachland mayor declines early vaccination offer

Mayor Cindy Fortin said she wants seniors, immunocompromised individuals to get the shot first

B.C. Premier John Horgan speaks at the B.C. legislature. (B.C. government)
Tougher COVID-19 restrictions in B.C., including travel, still ‘on the table’: Horgan

John Horgan says travel restrictions will be discussed Wednesday by the provincial cabinet

Conservation officers caught three men over fishing bull trout in Kinbasket Lake. (Facebook)
B.C. men fined $1.7K for overfishing near Revelstoke, Golden

The seized fish were donated to the Golden Food Bank

NorKam secondary student Karis Wilson in the outfit that got her sent home from school on Feb. 23, 2021. (Kamloops This Week photo)
Clothing that ‘detracts from learning process’ removed from SD73 student dress code

Policy change underway after student in knee-length dress, long-sleeve turtleneck sent home

A shop up on Grand Oro Road near Twin Lakes burned down on Monday. (Facebook)
Fire rips through shop in small South Okanagan town

The building was destroyed despite community efforts to fight the fire

WATCH: Conservation group releases short doc on saving South Okanagan’s ‘precious’ Sickle Point

Sickle Point, the last intact wetland near Skaha Lake, is facing the prospect of development

Most Read