The Fraser Institute has got some advice for governments across British Columbia.
According to Steven Globerman, a Senior Fellow at the Vancouver-based think tank, if British Columbia wants to attract more tech companies and encourage entrepreneurship, they must implement significant policy changes to make the province more attractive to entrepreneurs and high-skilled workers.
“The vision of B.C. becoming a large tech hub will only become a reality if policymakers in the province improve the policy environment for business,” said Globerman in a new essay titled The Outlook for Growth in British Columbia’s Private Sector.
Globerman points to B.C.’s tax rate as an example.
The province’s business tax rate jumps from 2 per cent to 12 per cent once a company’s revenues reach $500,000 per year, disincentivizing growth for companies already in B.C. and potentially discouraging others from relocating to the province.
While U.S. tech giants flock to Vancouver for our “relatively abundant” supply of scientific and engineering talent, Globerman warns that the province’s dearth of anchor companies reflects in part the province’s tax structure.
Anchor companies are large firms that have headquarters in a location and whose presence contributes to labour-market mobility, technology spinoffs and startup companies, and other phenomena associated with thriving technology hubs.
Increasing the number of anchor companies – 200-plus employees, $50+ million in revenue, and BC-led – in the local tech ecosystem has long been the top priority of the BC Tech Association and progress has been made with the emergence of unicorns like Clio.
“Doubling the number of anchor companies in B.C. is our top priority, as this will create a stronger ecosystem, fuel investment in training and infrastructure, cultivate investors who then look for more opportunities to invest in BC and encourage more startup spinoffs,” BC Tech CEO Jill Tipping wrote in 2019.
Globerman believes appropriate changes in the tax structure facing the province’s business sector would encourage the emergence and growth of local anchor firms.
According to the report, B.C.’s combined (provincial plus federal) personal income tax rates for top earners are significantly higher than combined rates in every U.S. state including high-tax jurisdictions such as California.
When you combine these tax disincentives with the city’s escalating housing market and Vancouver becomes one of the most unaffordable cities in North America.
“By reducing top tax rates and encouraging housing construction to improve affordability, policymakers in B.C. can make the province more attractive to the tech sector, which creates jobs and wealth,” Globerman writes.