First Choice Capital Advisors » business leadership

HST & How it Helps Businesses & Citizens

Richard Wong — Wed, 28 Apr 2010 00:06:45 +0000

HST vital to sustaining economic prosperity in BC

The BC government intends to harmonize the provincial sales tax (PST) with the federal GST, effective July 1, 2010. This will result in the elimination of the PST and the establishment of a new, single harmonized sales tax (HST) initially set at a rate of 12%.

The business associations listed at the end of this document, and the tens of thousands of enterprises – large and small – that they represent, are supportive of moving to the HST

because we believe it will mean a stronger economy, more jobs, and higher incomes over time. There are a number of reasons why eliminating the PST and adopting the HST makes sense.

Increased competitiveness: By removing the PST that companies now pay on their inputs, the HST will make British Columbia more competitive. While the PST is often viewed as a “consumption” tax, in fact it applies to both consumption and production. Approximately 40% of PST revenue is paid by businesses on goods and services which they purchase to run their operations – everything from equipment, machinery, vehicles, and building materials to office supplies, furniture, energy, legal services and more. As this PST-related tax burden is removed, the vast majority of businesses will be in a better position to invest, to grow, and to sustain and create jobs.
More investment: A second and related reason to adopt the HST is that it will stimulate investment. Experience in Atlantic Canada and other jurisdictions confirms that shifting to a value-added sales tax like the HST paves the way for increased capital spending on machinery, equipment, structures, new technologies, and other productive assets. Additional business investment should lead to faster economic growth, more jobs, higher productivity, and greater exports – all of which are good for workers and consumers alike.
Reduced ‘paperwork’ burden: As British Columbia integrates its sales tax with the federal GST, compliance and ‘paperwork’ costs will decline for tens of thousands of BC businesses. Under the present system of separate provincial and federal sales taxes, businesses are forced to deal with two different sets of tax rules, administrative authorities, and compliance requirements. Tax filing, compliance, and other regulatory costs will be significantly lower under the HST, which should be especially beneficial for smaller businesses.
Federal government funding: By moving to a harmonized sales tax, the province is in line to receive $1.6 billion from the federal government. This reflects a longstanding federal policy to encourage the provinces to integrate their sales taxes with the GST in order to strengthen the Canadian economic union. Additional federal dollars will be helpful in allowing the province to maintain important public services and to pay for measures that may be used to facilitate the transition to the HST for a small number of vulnerable industry sectors.
Aligning with other provinces: Finally, the fact that Ontario plans to legislate its own version of the HST next year, and that Quebec and three Atlantic Canadian provinces did so in the late 1990s, is also an important factor. These provinces represent about 70% of the Canadian economy. The HST will put BC on a more even tax footing within Canada and ensure that needed investment dollars and jobs aren’t lost to other jurisdictions.

A healthy business sector is a vital part of any thriving economy. By providing jobs and buying inputs from local suppliers, competitive enterprises make a big contribution to the tax base that governments rely on to pay for programs and services. The HST promises to strengthen the foundations for BC’s high standard of living by helping to expand the economic pie and spurring the creation of more good-paying jobs.

Consumption taxes are sometimes criticized for being “regressive,” by disproportionately affecting lower income households. To address this concern, the provincial government has

pledged to provide a new, refundable HST credit which will be paid quarterly along with the existing GST credit, to lower income individuals. We believe this represents a balanced and

equitable approach to ensuring that lower-income citizens do not face an added economic burden from the HST.

In conclusion, while we recognize that a few industry sectors may face challenges as the HST is implemented, overall we are convinced the HST will generate positive economic results for businesses, consumers, and workers in British Columbia in the years ahead.

Re-printed with permission.

Email: Richard Wong, CMA rwong@firstchoicecapital.ca

Xenon Pharmaceuticals CEO Interview on Canada’s Reduced Funding Part 2

Richard Wong — Wed, 29 Apr 2009 23:40:05 +0000

Part 2: Simon Pimstone, President & CEO of Xenon Pharmaceuticals Interview

As a large part of the life sciences group in BC Simon Pimstone met with Liberal leader Michael Ignatieff on life sciences and explained the issues of funding, and you would think that it would fit in with Ignatieff’s desire to build a larger knowledge based economy and a louder opposition to the Canadian federal government’s budget would have sent that message on behalf of the life sciences community that it does have greater support, especially in the downgrade in future funding in this area.

The Canadian TV & film industry according to industry reports employed 126,900 FTE’s (full time equivalents) and the value of production was $5 billion in the 2006/2007 years. This compares to the Life Sciences industry in Canada which produced sales of $1.9 billion but the tax breaks are not equal with the Canadian federal government and provincial government film and TV tax credits allowing up to 53.5% of BC labour expenditures on a yearly basis.

BC universities produce between 3,000 to 4,000 science graduates of which many do not find employment in Canada, yet all the life sciences is asking for is a fair share of funding to continue to find cures for different diseases that helps all Canadians and the world. The public cost of educating students who end up working in another country is approximately $48 million (3,000 students * $40,000 expected cost of education * 40% funding from governments, estimated) . This a huge cost only for a single province, not the entire country where the Canadian people are funding scientists to work in other countries at the end of the day.

What’s important is not providing funding on an ad hoc basis but continued basis even if its smaller amounts to foster an environment of innovation and then onto commercialization opportunities through Genome Canada, CIHR (Canadian Institutional Health Research) and tax incentives.

Our health system is arguably one of the best in the world, some say the United States, but only if you’re willing to pay $2,000 per month.

SRED is a good funding tool starting from 1995, but really now inadequate for Canada’s life sciences sector as drug development takes much more time and money in order to recoup research funding. It is only good for Canadian controlled private corporations, (CCPC’s) which many are not anymore because they’re too large and Aspreva Pharmaceuticals & Biovail Pharmaceuticals are some of the few companies which have profits in order to recoup some of these research that takes several years to make create a single drug. A cap limit on SRED would even be more palatable to the sector ie. $100 million if they took off the CCPC eligibility requirement and the threshold are too low with barely any increases since 1995.

Even if tax incentives, to entice offices in Canada such as providing tax holidays for bringing in new manufacturing facilities where they employ 200 people which are paying income tax now where they don’t pay personal income tax for the first 2 years with a commitment for 5 years residency then people would be paying taxes and spending that income in the country and province.

Allow investments earned from life science investments in 2009 and 2010 to be exempt from capital gains tax but was ignored by the federal government in the budget. Use some of the carry forward losses that life science companies have accrued and provide a formula where say 1/2 of all carry forwards are eligible ie. 40 million and provide a cash reimbursement for 25% of the 1/2 which would result in needed funding to continue doing research to reaching the milestones.

The facts are that SRED was really designed for large company models, large drug companies, large aerospace companies, not really the Canadian life sciences sector which the majority are small companies from 5 to 150 people. The inadequacy of updating the Canadian Scientific Research & Exploration Development tax credit system is costing the Canadian economy jobs in the short and long term, but more importantly the potential cures to the various diseases and cancers out in the world.

Written by Richard Wong, CMA rwong@firstchoicecapital.ca

Xenon Pharmaceuticals CEO Interview on Canadian Funding Decreases Part 1

Richard Wong — Tue, 21 Apr 2009 20:28:23 +0000

Part 1: Simon Pimstone, President & CEO of Xenon Pharmaceuticals Interview

Canadian government’s announcement on reduction of future funding for Genome Canada affects life sciences companies in British Columbia, including larger start ups such as Xenon Pharmaceuticals.

Affects of this including having fewer jobs and hindering the ability of companies to commercialize their intellectual property they have created in Canada because of the cost to do this, hence the need for Canadian life sciences companies needing to partner up with large American and European pharmaceutical companies in order to get these discoveries to market.

For start-up companies Genome Canada has provided bio-tech companies with the ability to do research and keep our science graduates from our universities to bolt to the United States & Europe with the so called brain drain.

A current Xenon Genome BC project has 10 to 15 scientists working on the project currently, which if Genome Canada funding wasn’t available, these high paying jobs would not exist in British Columbia.

Because Canada has such a tiny venture capital pool for life sciences, life sciences funding is largely dependent on foreign venture capital funding as the primary source of funding as well as Canadian federal and provincial funding.

While in the United States the National Health Institute (NIH) funding will be increasing by $3 billion announced by President Obama whereas the funding from the Canadian government has decreased. The government is doing exactly the opposite and sending a statement on the importance or lack of it on science and technology in British Columbia.

President Obama has announced already funding for green energy grids, health and innovation, whereas in Canada we are still focused on the old school infrastructure is an opinion in the life sciences community.

Simon Pimstone commented that if you’re putting money into infrastructure which will build a knowledge based economy, such as technology parks for Pharma companies. Companies like GlaxoSmithKline or Johnson & Johnson will be enticed to build manufacturing vaccine facilities which provides high paying opportunities for science students for years to come.

Continued in Part 2 of Interview with President & CEO Simon Pimstone

Polaroid Auctioned Off to Patriarch Partners with $59.1 Milln bid

Richard Wong — Mon, 06 Apr 2009 20:43:40 +0000

Polaroid known as a maker of instant cameras and film was finally auctioned off for $59.1 million in a bankrupty protection. This famous company had come upon hard times, but it’s interesting to note that the price tag was for the intellectual property, company, and digital and hard film collection.

Question is that does Patriarch think the company’s digital assets are worth more than the Polaroid name? When you’ve had companies such a Sony, Hewlett Packard, and a host of camera phone makers enter in the space along with Polaroid and Kodak you would think that the Patriarch the private equity firm known for its reputation as a turn around artist it would try to leverage more of its digital assets than the previous management of Polaroid.

Written by Richard Wong, CMA rwong@firstchoicecapital.ca

Corporate Social Responsible Vancouver Company Who Sells Coffee & Chocolate

Richard Wong — Thu, 19 Mar 2009 21:00:47 +0000

A Vancouver, B.C. based company A Better Life Brands International specializes in selling delicious coffee and chocolate with a twist, 5 to 10% of all revenues go to the Give a Better Life Foundation where charitable projects are undertaken. The current projects include building a clean water system in Bulate, Ethiopia a village of 850 people, winter shelter for homeless in Vancouver, and a safe shelter for women and children rescued from the human trafficking trade in Vancouver.

You can vote on which cause you want to help and what a better way to than to buy from a corporate socially responsible company whose founders Sara Davis and Darryl Davis talk the talk and walk the walk. The coffee is fantastic, I tasted it at a Costco Wholesale a few weeks ago and was impressed with their company and thought wow, another great Vancouver socially corporate responsible company to talk about in today’s economy.

Better Life Brands has appeared on Urban Rush TV show on Shaw Cable, written up in Glow Magazine, but its great where a company like this helps take the lead in this still evolving world of corporate social responsibility. Another corporate social responsible coffee company is Ethical Bean Coffee, and Frogfile Office Essentials, in Vancouver if you want another example of small companies making a difference here in Vancouver and elsewhere in the world.

The company websites are www.betterlifebrands.com and www.frogfile.ca

Written by Richard Wong, CMA rwong@firstchoicecapital.ca

Community Small Business Loans Alive with Vancity Savings Credit Union

Richard Wong — Tue, 17 Mar 2009 19:22:33 +0000

In today’s economy people who are looking to start businesses here all over the media that the credit crunch has hit everyone and it’s impossible to get financing. In our business we certainly see that for existing clients with large banks as their creditors it certainly is more trying in determining whether or not to cut back on costs, or deciding on going after acquisitions.

The basis for capital has always been based on “How’s your credit worthiness and what’s the Collateral.” In Vancity’s case Community business loans are based on “Character & Business Viability.”

This major difference in helping small businesses in BC has amounted to loans of over $13 million for 800 companies.

The question is why would Canada’s largest credit union with over $14 billion in assets and over 390,000 members why would they do this, simply because by helping out small businesses establish themselves in the first 5 years they will in turn likely turn these customers into larger businesses with larger operating credit lines, create more jobs, and help the credit union grow as well.

If larger banks had a small portion of their business directed to helping smaller new businesses they maybe able to do the same, possibly, but Vancity has taken the risk and it seems to have provided a service where potential small business owners can look to for help in financing.

Written by Richard S. Wong, CMA rwong@firstchoicecapital.ca