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

Winnie Peters, centre, spoke about the loss of two husbands over the years, both of who were murdered. The Missing and Murdered Indigenous Women and Girls event in Hope on May 5, 2021 included prayers for men who have been killed as well. (Jessica Peters/ Hope Standard)
Red dresses hang in Hope’s Memorial Park in remembrance

Group gathers for National Day of Awareness of Missing and Murdered Indigenous Women and Girls

Motorists breaking travel rules can be fined $230 for failing to follow instructions or $575 if the reason for travel violates the essential travel health order, at this Highway 3 check area near Manning Park. Photo RCMP
RCMP begin checking drivers on BC highways

Four check points are set up Thursday May 6 around the province

UBC Sports Hall of Famer Carrie (Watson) Watts (far right, front row) helped lead the UBC Thunderbirds to the 2004 national championship, their first since 1974. She served as assistant coach a few years after graduation. (Photo/UBC)
Agassiz-born basketball star inducted into UBC Sports Hall of Fame

Carrie (Watson) Watts helped lead the team to their first championship in decades

The Aquilini Investment Group has agreed to a proposed contract of five years to run the Abbotsford Centre. (File photo)
Proposal to run Abbotsford Centre offered to Canucks ownership group

Planned five-year contract to cost city $750K annually, starting Jan. 1, 2022

JANGO the police dog helped track down a suspect on Luckakuck Way in Chilliwack. (RCMP photo)
Alleged thief in Chilliwack can’t fool the nose of JANGO the police dog

An Edmonton man who allegedly broke into a storage container on Luckakuck Way was arrested

Protesters attempt to stop clear-cutting of old-growth trees in Fairy Creek near Port Renfrew. (Will O’Connell photo)
VIDEO: Workers, activists clash at site of Vancouver Island logging operation

Forest license holders asking for independent investigation into incident

A worker rides a bike at a B.C. Hydro substation in Vancouver, on Friday, April 16, 2021. THE CANADIAN PRESS/Darryl Dyck
BC Hydro report raises safety concerns as pandemic prompts jump in yard work

Incidents involving weekend tree trimmers, gardeners and landscapers have risen 30% since the pandemic hit

Surrey RCMP is investigating after a serious three-vehicle crash at the intersection of King George Boulevard and 128th Street Thursday afternoon (May 6, 2021). (Photo: Shane MacKichan)
VIDEO: Serious crash in Surrey sends 1 to hospital

Surrey RCMP say one of the drivers fled on foot, but was later found at an area hospital

Starting Tuesday, May 11, B.C. adults born in 1981 and earlier will be able to register for a vaccine dose. (Haley Ritchie/Black Press Media)
BC adults 40+ eligible to book COVID-19 vaccinations next week

Starting Tuesday, people born in 1981 and earlier will be able to schedule their inoculation against the virus

John Paul Fraser, executive director of the BC Salmon Farmers Association. (Screen shot)
Salmon farmers warn Surrey jobs on line as feds end Discovery Islands operations

344 full-time jobs at risk in Surrey and 1,189 B.C.-wide

Parks Canada and Tla-o-qui-aht Tribal Parks dig the washed up Princess M out from sand along the south shore of the Pacific Rim National Park Reserve. (Nora O’Malley photo)
Rescue attempt costs man his boat off Pacific Rim National Park Reserve

Coast Guard response questioned after volunteer responder’s speedboat capsizes in heavy swells

Al Kowalko shows off the province’s first electric school bus, running kids to three elementary and two secondary schools on the West Shore. (Zoe Ducklow/News Staff)
B.C.’s first electric school bus making the rounds in Victoria suburbs

No emissions, no fuel costs and less maintenance will offset the $750K upfront expense

Road sign on Highway 1 west of Hope warns drivers of COVID-19 essential travel road checks on the highways into the B.C. Interior. (Jessica Peters/Chilliwack Progress)
B.C. residents want travel checks at Alberta border, MLA says

Police road checks in place at highways out of Vancouver area

Victoria police say the photo they circulated of an alleged cat thief was actually a woman taking her own cat to the vet. (Black Press Media File Photo)
Photo of suspected cat thief released by Victoria police actually just woman with her pet

Police learned the she didn’t steal Penelope the cat, and was actually taking her cat to the vet

Most Read