VICTORIA, British Columbia (Reuters) - British Columbia’s government on Tuesday projected a budget surplus for the next three fiscal years and gave details on a new tax regime for its nascent liquefied natural gas (LNG) industry.
The Western Canadian province is expected to have a budget surplus of C$184 million ($167.94 million) in 2014-15, C$206 million in 2015-16 and C$451 million in 2016-17, the Liberal government said in its first budget since it was re-elected in May with a majority.
The government said the revised surplus for 2013-14 is now seen at C$175 million, ahead of the projected C$165 million surplus the government foresaw in the second quarter.
Finance Minister Michael de Jong said the province will keep the books balanced by controlling spending, working with the private sector on jobs and encouraging economic growth, with a focus on resource development.
“We continue to balance essentially on a razor’s edge when you consider a C$44 billion plus budget,” de Jong told reporters before presenting the budget, adding that ongoing global economic uncertainty could pose a risk to the fiscal plan.
Before budget day, de Jong had warned there would be few goodies, though the province did introduce legislation for a previously announced new early childhood tax benefit and revealed a break for first-time home buyers related to a property transfer tax.
A key budget highlight included a new two-tier income tax for the growing LNG industry in the province, setting the tier one rate at 1.5 percent and the tier two rate at up to 7 percent, to be finalized with legislation in the fall.
The tax will apply to income from the liquefaction of natural gas, the process of cooling gas into a liquid to be transported by ship, at facilities in British Columbia.
The first tier will apply to net proceeds once commercial production is achieved, while the second tier will kick in after the operator’s capital investment costs related to the construction of the LNG facility have been recovered.
Premier Christy Clark has prioritized the development of LNG export terminals along the province’s rugged Pacific coast, which she has said could boost the economy by as much as C$1 trillion and create some 100,000 jobs over the next 30 years.
So far, seven proposed projects have won licenses to export cheap Canadian natural gas to overseas markets, though no final investment decisions have been made.
The tax regime remains a key hurdle, as investors have been unwilling to commit billions in capital spending to pipelines, liquefaction plants and export terminals until the financial parameters are clear.
British Columbia will also spend C$29 million over the next three years to support the development of the LNG industry, including money for attracting investment, the regulation and permitting process, and environmental protection.
($1 = 1.0957 Canadian dollars)
Editing by James Dalgleish and Andrew Hay