Finally, the presence of major corporate head offices has positive spillovers for regional
economies. Among other things, a substantial and thriving corporate head office sector
increases the demand for locally provided professional and business services (accounting,
law, executive search, engineering, architecture and design, etc.). It also directly supports
high-paying jobs in the large companies that have their headquarters in an urban region, and
enhances the business community’s capacity to contribute to and invest in local institutions
and philanthropic activities (universities, hospitals, the arts, etc.). The presence of corporate
headquarters is an area where Metro Vancouver has lagged behind other large North American
urban centres. If more BC-based companies grew over time to achieve significant size, both the
province and Metro Vancouver would benefit in many ways.
Government policy can help to shape an economic environment in which more companies
will aspire to grow, export, and innovate—and embrace business strategies that are aligned
with these goals. Making it simple to start a new company is certainly a good first step. Ensuring
that capital is available to fund both start-ups and growth-oriented SMEs in general is critical;
this includes not only venture capital, but also other sources of financing: mezzanine capital,
private/public equity, bank loans, and strong “angel” investor networks.
Ideally, tax policy should also be geared to fostering entrepreneurial ambition and encouraging
companies to grow. Here, Canada’s record is far less impressive.9 The tax system actually does
surprisingly little to help companies expand or to export. Indeed, existing business tax policy,
nationally and in BC, embodies incentives that hinder growth—for example through much
lower income tax rates and more generous R&D provisions for small firms. Some provinces,
such as Ontario, impose higher payroll tax rates as enterprises add employees to their payrolls.
These long-standing features of the Canadian business tax structure require a re-think if
governments want to encourage SMEs to grow and step up their participation in international
markets.
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Unfortunately, in BC the 2013 provincial
budget took a step in the wrong direction, by
hiking the basic corporate tax rate from 10%
to 11% while leaving the preferential small
business tax rate at 2.5%. As a result, today
in BC the basic combined federal-provincial
business tax rate is