The B.C. New Democrats are calling for an investigation into the province’s controversial “International Business Activity” (IBA) program, calling it “a shady giveaway scheme.”
The program has become a hot topic in the final days of the provincial election campaign after a B.C. Court of Appeal ruling revealed that TD Bank claimed a $2.8 million tax rebate under the terms of the IBA.
NDP candidate David Eby wants the province’s auditor general to probe the program, which he alleges “gives away millions in taxpayer dollars to unnamed corporations with no discernible benefits for British Columbians.”
NDP leader John Horgan says the B.C. tax rebate program for international business needs to be investigated because it’s a “shady give-away scheme.” (Media Pool )
The message was repeated by NDP leader John Horgan.
“We need to make sure we’re not giving hard-earned tax money to profitable companies,” said Horgan. “Companies that I would add, provide sizable donations to the B.C. Liberal party.”
‘A good investment’ says Christy Clark
The NDP comments came shortly after B.C. Liberal leader Christy Clark defended the province’s controversial program which gives tax breaks to businesses that set up international operations in the province.
“The evidence tells us it’s helping create jobs in British Columbia,” said Clark during a campaign stop in Richmond Friday. “We are making more money from it than it’s costing us, so the evidence tells us it’s been a good investment.”
When pressed for numbers on how many jobs had been created for British Columbians, Clark said “I can get that number for you,” but later in the day her office was unable to provide those figures, saying “due to the election, we have no way to access ministry information.”
The B.C. Liberal party provided a statement quoting 10-year-old statistics: “(An) estimated 1,140 direct and indirect jobs were created between 2004 and 2007 … alone plus $12 million in additional tax revenue to government,” said party spokesperson Alexis Pavlich in an email.
Tax breaks of 100%
Businesses that become “core members” of the International Business Activity program have to meet certain eligibility requirements to receive tax breaks. The stated purpose of the program is to encourage companies to move international offices and employees to B.C., with the goal of creating economic spin-offs for the province.
As an incentive, the IBA program provides provincial tax breaks of 100 per cent for eligible companies and employees in the first two years of coming to B.C., with the exemption dropping to 25 per cent over five years. For individuals to qualify, “an eligible specialist must be paid wages of at least $100,000 annually,” according to B.C. budget documents
A B.C. Court of Appeal ruling, recently filed, revealed the Toronto Dominion bank sought a $2.8 million tax credit under the program in 2012.
The amount only came to light when TD bank got into a legal fight with the province over a filing deadline.
The bank was eligible for a provincial tax refund under the program, in the same year it made an annual profit of $6.47 billion. In the first quarter of this year, TD bank has reported profits of $2.5 billion.
When questioned why a highly profitable Canadian-based bank was eligible for a $2.8 million refund, Clark told CBC News, “I guess the folks at finance (ministry) decided they’d met that goal in order for them to be eligible.”
Program decades old, says Clark
The IBA program has 82 “core members”, including the Toronto Dominion Bank, Royal Bank of Canada, RBC Dominion Securities, Canadian Imperial Bank of Commerce and Scotia Capital, as well as foreign financial institutions such as the Bank of China, HSBC Bank Canada, and KEB Hana Bank of South Korea.
Former finance minister Colin Hansen now heads AdvantageBC, a non-profit that markets the province to companies as a place for international business. T.D. bank is a member of the organization. (Jacy Schindel/CBC)
Colin Hansen, the president of the non-profit, AdvantageBC which promotes the program, estimates “that in any one year probably 50-60 per cent of those companies would be filing for refunds.”
Clark says the program has been around for almost 30 years and is not new to her government.
“Remember this is a program that was brought in by the Social Credit (party) in 1988. It was maintained by the New Democrats for 10 years and it’s existed ever since.”
But B.C. budget documents show the program has undergone major changes in recent years under the B.C. Liberals.
Expansion by B.C. Liberals
Internal government documents obtained under a freedom of information request show expansion started in 2004, when the Liberal government of then-premier Gordon Campbell was in power.
“Under the new legislation, activity in the program increased rapidly”, states a 2010 program review, “from $4 million…to $14-16 million per year in tax refunds.”
The B.C. government’s 2011 budget shows the IBA was further expanded “to allow Schedule III banks to qualify for the International Business Activity (IBA) Program with respect to their international financial business.”
Schedule III banks are branches of foreign banks operating in Canada.
Clark admits her government has increased the size of the program.
“We have started additional programs since I became premier four years ago, to add head offices to B.C.. So we’re continuing on that, to pursue the ends of the program.”
In the B.C New Democrat news release calling for an investigation into the International Business Activity program, David Eby says an NDP government “Will cancel shady corporate tax giveaways and invest those funds in cutting costs for British Columbians.”
But he adds “If the Auditor-General finds that any aspects of the program are providing a good return for British Columbians, the BC NDP will maintain them.”