B.C. tax cuts help ease high-tech recruitment, experts say

Tax cuts for high-income earners have made it much easier for British Columbia’s high-tech industries to attract qualified staff, according to George Hunter, the president of Leading Edge BC, a non-profit marketing and investment attraction organization.

“The government has made a number of significant changes going way back,” Hunter said in an interview. “All of these have contributed to a bettering of the environment for technology, and in fact industry generally.”

While the previous NDP government took some positive steps, the 25 percent cut in personal income taxes introduced soon after the B.C. Liberals took office in 2001 was important, Hunter added: “That was really a direct response to a real concern that existed in the technology sector that our tax rates were inhibiting our ability to attract highly qualified people from outside the province.”

“Since that time, we’ve seen a dramatic increase in the ability of our companies to recruit executives from outside of the province,” he said. “Before, it was almost a rule of thumb in industry that there was no way you could get anyone from the States to come to B.C.”

Hunter was commenting following the release earlier this month of Input Indicators of the British Columbia High Technology Sector, produced jointly by Leading Edge BC and BC Stats, the provincial government’s central statistical agency.

It reports that the average total taxes paid by a single, unattached B.C. individual earning $80,000 averaged $22,065 last year, the lowest level in Canada. (This figure includes all federal and provincial income taxes, as well as health-care premiums and GST.)

This is a sharp reduction from the $28,782 such an individual would have paid in 1995.

In 2005, a similar individual in Alberta paid $22,212, while an Ontarian paid $25,667 and a Quebecois $32,741.

Hunter added that a new government program providing a 30 per cent provincial tax credit for technology investments has also proved a boon.

“That has spawned a huge revival in early-stage companies.” Hunter said. “The provincial government’s done a pretty good job over the years of continuing to improve the environment for technology here.”

Hunter said some human resources problems remain, especially in IT.

He cited his personal rule of thumb.

“When times are bad, money’s the issue, and when times are good, people are the issue,” he said. “And in the present time, we’re in a period of resurgence. People are the big challenge.”

Caroline Lewko, the president and chair of the Wireless Innovation Network of British Columbia, is upbeat about the state of her part of the high tech industry.

“We’re smoking,” said Lewko.

While part of the boom is related to the state of the worldwide wireless industry, there are also local factors.

“It’s a process of where the wireless sector is in general, but a lot of our companies started when mobility wasn’t as big a buzz word as it is now,” Lewko said. “Our companies are actually making money now–that’s pretty exciting.”

The one change in government policy she’d like to see is that tax credits for research and development no longer be restricted to B.C- or Canadian-owned companies.

“That would make a huge difference.”

This would be particularly valuable during the present high level of merger and acquisition, as an inducement to keep more R&D activity in the province, she said.

The report also says that B.C. leads other provinces in terms of small businesses selling online. In 2005, 24 percent sold their goods or services online, considerably higher than in other provinces.

In addition, 46 percent of B.C. small businesses maintained a website, the same rate as Ontario. In comparison, 42 percent of Alberta businesses and 30 percent of those in Quebec did so.

According to the report, the University of B.C. now leads the other nine top Canadian research universities in technology licensing, with a gross income of $13.7 million in 2003-the last year for which figures are available. Second was Queen’s University, with $4.9 million in 2003.

Other input indicators provide a mixed message, according to the report. For instance, while venture capital investment is above the average for Canadian provinces, the business performance of R & D lagged the Canadian average. As well, the acceptance rate for B.C. patent applications was below average.

During 2001-2003, fewer than one in four B.C. applications resulted in the issuing of patents.

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