Appointing an expert panel to review business taxes in B.C. is a good idea, though I fear this august group may be sent into a complex mine-field with one or two hands tied behind their backs.

The worst impediment for the seven panel members named Tuesday by Finance Minister Kevin Falcon is not of his making.

It's that one good option - probably the very best - has already been ruled out, not by the government that appointed them, but by the voters who elected that government.

No intelligent review of B.C.'s business tax competitiveness can fail to note the advantages of a value-added tax that exempts business inputs, as opposed to the perverse PST that adds to the cost of production tools and raw materials. And a value-added tax, the HST, is precisely what voters vetoed - for a long time if not for all time - in the referendum last year.

But Falcon further reduced the scope - and hence the usefulness - of this tax review by imposing additional restrictions.

He inexplicably put royalties - a major, though wildly fluctuating, source of provincial revenue - off limits.

He was firm that the panel cannot suggest reforms that cost the government money - a sensible limitation at a time when the budget is already in the red.

And his ministry also noted in response to my questions that the panel can't recommend either tax shifts to consumers or the 100-per-cent-effective, popular-with-many-voters solution of cut-ting spending.

In other words, it's left to tinker within quite narrow parameters.

The prohibition against recommending tax shifts may sound like a sensible limitation to focus the review on business taxes, not personal ones, and it may be prudent given how so many voters went ballistic when they perceived the HST to be a tax shift from business to consumers. (It was, even though I think it was a justifiable one.)

But sensible and prudent or not, it's sure to be problematic when the panel considers property tax, which is part of its mandate. The big business-related property tax issue in B.C. - one that impacts competitiveness in a big way - is that some municipalities heap a disproportionately large tax burden onto business and industry. It hit the point where mills in some one-industry towns were paying tax rates 20-30 times higher than residents, or where, until council began a series of small steps to address the issue, businesses in the city of Vancouver were subsidizing almost half of the services consumed by city residents.

The problem, in other words, is that too much municipal tax burden has over the years been shifted onto too few shoulders.

The sensible solution is to shift some of it back until reasonable balance is achieved.

If the panel can't tell the minister that, then I don't know what the heck they can say that will mean anything at all.

Still, there is worthwhile work to be done by the seven panelists - Chair Sarah Morgan-Silvester, chancellor of the University of British Columbia; Lindsay Hall of Goldcorp; Laura Jones of the Canadian Federation of Independent Business; Elio Luongo of KPMG; Fiona Macfarlane of Ernst & Young LLP; Grace Wong of UBC and adjunct member Dale Wall, a former deputy minister of community and rural development.

For one thing, there are questions about the appropriate level for B.C.'s carbon tax, and how the PST can be reinstated as painlessly as possible.

For another, given solid research suggesting the nature of business taxation is almost as important as the level when it comes to fostering or deter-ring growth, there are real questions about the mix and relative weight of business taxes.

In general, it's worst to tax businesses when they need money most - when they're buying equipment or inputs - as the PST does, or when they're not doing very well, as property tax or payroll taxes may often do. It's best to tax them when they have money in hand, as corporate income taxes do.

Ironically, corporate income tax is probably the most competitive aspect of B.C.'s entire business tax regime - to the point where I've argued that the two per cent rate on small business, which was once scheduled to be reduced to zero, is too low.

So I look forward to seeing what the panel can do within the parameters its mandate allows.

dcayo@vancouversun.com

Blog: vancouversun.com/economy