Governments prefer indirect taxation partly because politicians assume they’ll take less heat if hands of tax collectors slip into our pockets surreptitiously. That’s done in BC by instructing crown corporations to overcharge customers and transfer surpluses to the public treasury. This allows BC Liberals to make a claim like one on the finance ministry website:
“The general corporate income tax rate in B.C. is among the lowest in North America and the G7 nations.”
Liberals also could say that oil, gas and mining companies pay among the lowest royalty rates anywhere in the world. But, low corporate income taxes and low resource returns mean that government looks elsewhere for revenues.
One of those places is ICBC. The insurance company delivered $677 million to the provincial treasury in 2010 and 2011 and has been told to contribute another $550 million in the next three years. Former Liberal MLA Geoff Plant, whose law firm billed the province more than $1 million in 2013, sees overcharging by crown corporations as good. Mind you, he’s not worried about insurance rates as long as $50,000+ sails his way each year for attending a few meetings of BC Ferries. (He and his family also get free passes to ride the ferries.)
The cash transfers are only part of the amount contributed by ICBC. For one thing, it saves costs that would otherwise fall on the government by providing a fine salary and corner office to Paul Taylor, a good Liberal who found a road outside government, while still paved with gold, was bumpy. More on Taylor at A cheapjack’s parachute is stained.
ICBC also contributes hundreds of millions each year to the province through insurance premium taxes and by directly paying for road improvements, traffic safety programs and driver and vehicle license administration.
The real money for the BC treasury comes from the public utility company. Since 1998, BC Hydro paid $11.5 billion to government. The largest transfer was in the year ended March 31, 2011: $945 million. However, that was also the year that BC Liberals promised a new energy policy with greater emphasis on private power production. Not long after, buying that power high and selling it low created a major drag on BC Hydro financial results. With the 2013 election pending, government could not sustain the 2011 level of cash transfers without even higher rate increases.
Not surprisingly, with the election behind them, BC Liberals are preparing massive increases in electricity prices. The 26.4% suggested in a leaked document would take a billion dollars a year out of our economy. It will be painful for us all.