2009 Nova Scotia Budget Report
September 24, 2009
Highlights
- Deficit of $592 Million Projected for 2009-10 Fiscal Year
- New Manufacturing and Processing Investment Credit Confirmed
- Transit Credit and Extension to the Healthy Living Tax Credit Deferred
- New Home Construction Rebate
Overview
“A Secure Future"
On September 24, 2009, Finance Minister Graham Steele presented the first budget for the new Nova Scotia government. This was actually the second budget address for 2009, as the former government was defeated shortly after presenting its budget on May 4, 2009.
In his speech, the Minister confirmed that the financial picture is darker than was portrayed in the May 4th budget and a deficit of $592 million is now projected for the 2009-10 fiscal year. This will require a change to the province's balanced budget rules contained in the Provincial Finance Act. The main reasons cited for the deficit are a $340 million obligation for university funding and a $125 million reduction in government revenue. Longer term projections show a return to balanced budgets for the 2010-11 fiscal year and beyond. According to the Minister, the contents of the budget from a fiscal perspective have otherwise not changed significantly from the budget presented on May 4th.
From a tax perspective, the government announced some new changes while choosing not to follow others that were previously announced. For businesses, a new manufacturing and processing investment credit was introduced for qualifying investments made after 2009. Unfortunately, there was no reference in today's budget to the corporate income tax rate reduction on small business income that was announced in the May 4th budget. As that change would not have started to be phased in until 2011, perhaps this initiative will be revived at a later date. For individuals, an HST rebate will eliminate the provincial portion of the HST from basic home electricity costs, starting on
October 1, 2009. In addition, the Equity Tax Credit will be enhanced and it will be extended along with the Labour-Sponsored Venture Capital Tax Credit.
The following is a summary of the more important items of interest to our clients.
|
Nova Scotia Budget Summary -
Statement of Operations
(in millions $)
|
|
|
Original
Estimate 2008/2009
|
Actual
2008/2009
|
Projected
2009/2010
|
|
Revenue
|
8,108
|
8,135
|
8,055
|
|
Expenses
|
(7,428)
|
(7,654)
|
(8,205)
|
|
Debt servicing
costs
|
(905)
|
(867)
|
(889)
|
|
Consolidation and
accounting
adjustments for governmental
units
|
57
|
46
|
90
|
|
Net income from government
business enterprises
|
358
|
360
|
357
|
|
Provincial
Surplus
|
190
|
20
|
(592)
|
Personal Tax Changes
Personal Amounts and Credits
The Personal Tax Credit amount will be increased by $250 as previously announced - from $7,731 in 2008 to $7,981 for 2009. It was also confirmed that the personal credit amount will be increased to $8,231 for 2010. Other Nova Scotia personal tax credits, such as the Spousal, Disability, Pension, and Age amounts, will be increased by 3.23% in 2009 and 3.13% in 2010.
Graduate Retention Rebate
As a replacement for the Graduate Tax Credit, the Graduate Retention Rebate became effective on January 1, 2009. Under this rebate, graduates with a recent university degree can claim a tax reduction of up to $15,000 over six years, to a maximum of $2,500 per year. College diploma and certificate graduates will be eligible for a tax reduction of up to $7,500 over six years, to a maximum of $1,250 per year. Students who graduated in 2006, 2007, and 2008 will still be able to take advantage of any unused credits from the previous Graduate Tax Credit. These credits can be used in the year of graduation or in the following two years.
Equity Tax Credit and LSVC Tax Credit Extended
The Equity Tax Credit and the Labour Sponsored Venture Capital (LSVC) Tax Credit were implemented to assist eligible businesses to obtain equity financing by providing individuals with a personal tax credit for investing in these businesses and registered LSVC corporations. In today's budget, it was confirmed that the Equity Tax Credit rate will be increased from 30% to 35% of the value of eligible investments made, starting in January 2010. The maximum annual claim will be increased from $15,000 to $17,500.
The Equity Tax Credit and LSVC Tax credit were scheduled to expire on December 31, 2009. Both credits will be extended to February 29, 2012.
Healthy Living Tax Credit Deferred for Adults
The government announced in last year's budget that the Healthy Living Tax Credit for sport and recreational activities, available for eligible children's fitness activities, was to be extended to all Nova Scotians effective January 1, 2009. It was reconfirmed today that the extension of this credit to adult recreation expenses will be deferred and revisited at a later date. The credit continues to be available for children's sport and recreation registration fees to a maximum of $500 of expenditures for each child.
Transit Tax Credit Deferred
Last year's budget proposed that the province would match the federal Transit Tax Credit starting in 2009. However, the government reconfirmed today that the implementation of this credit has been deferred and will be revisited at a later date.
Volunteer Firefighters Tax Credit
For the 2009 tax year, the refundable Volunteer Firefighters and Ground Search and Rescue Tax Credits will increase from $375 to $500.
Business Tax Changes
Small Business Tax Rate
In the May 4, 2009 budget, the former Minister announced that the small business tax rate would be reduced to one-half of the current rate by 2013, in order for the province to better position itself for an economic recovery. In the revised budget presented today by the new government, no reference was made to this change.
Large Corporations Tax
Under previously announced changes, Nova Scotia's Large Corporations Tax (LCT) on the capital of corporations other than financial institutions declined from 0.2% to 0.15% on July 1, 2009 for corporations with taxable capital in excess of $10 million. Corporations with taxable capital under $10 million will continue to qualify for a $5 million deduction, and the capital tax rate declined from 0.4% to 0.3% on July 1, 2009. It was confirmed again today that these cuts will proceed on schedule and the capital tax will be eliminated effective July 1, 2012.
Manufacturing and Processing Investment Credit Confirmed
The Minister confirmed that a new Manufacturing and Processing Investment Credit will be introduced for eligible investments made on or after
January 1, 2010. The credit will be equal to 10% of these investments. More details on this program will be announced after further consultations with the manufacturing industry. The ability to use credits carried over under the former Manufacturing and Processing Tax Credit (which was eliminated in 2000) will cease on December 31, 2009.
HST Changes
Home Energy Rebate
On October 1, 2009, the government will implement a rebate of the provincial portion of the HST on residential electricity usage below the current 27.4 kWh per day threshold. The energy rebate will cover all residential electricity usage including the monthly basic charge.
New Home Construction Rebate
On July 7, 2009, the government announced a rebate of 50% of the provincial portion of the HST on new homes where construction began on or after
January 1, 2009, and the home is substantially complete by March 31, 2010. The maximum rebate available is $7,000 and will be limited to 1,500 homes.
How Nova Scotia Compares
The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to September 24, 2009.
|
|
Top 2009
Personal Rates
%
|
2009 Corporate Rates
|
|
|
|
General
%
|
M&P
%
|
Small Business
%
|
Retail Sales
Tax
%
|
|
BC
|
43.70
|
30.0
|
30.0
|
13.5
|
7.0
|
|
Alta.
|
39.00
|
29.0
|
29.0
|
14.0
|
-
|
|
Sask.
|
44.00
|
31.0
|
29.0
|
15.5
|
5.0
|
|
Man.
|
46.40
|
31.0
(1)
|
31.0
(1)
|
12.0
|
7.0
|
|
Ont.
|
46.41
|
33.0
|
31.0
|
16.5
|
8.0
|
|
Qué.
|
48.22
|
30.9
|
30.9
|
19.0
|
7.5
(4)
|
|
NB
|
46.00
|
31.0
(1)
|
31.0
(1)
|
16.0
|
8.0
(5)
|
|
NS
|
48.25
|
35.0
|
35.0
|
16.0
|
8.0 (5)
|
|
PEI
|
47.37
|
35.0
|
35.0
|
13.1
(2)
|
10.0
(4)
|
|
Nfld.
|
44.50
|
33.0
|
24.0
|
16.0
|
8.0
(5)
|
|
Yukon
|
42.40
|
34.0
|
21.5
|
15.0
(3)
|
-
|
|
NWT
|
43.05
|
30.5
|
30.5
|
15.0
|
-
|
|
Nunavut
|
40.50
|
31.0
|
31.0
|
15.0
|
-
|
- The general business and M&P rates were reduced from 32.0%
on July 1, 2009.
- The small business rate was reduced from 14.2% on April 1, 2009.
- The tax rate for M&P profits eligible for the small business deduction is 13.5%.
- Provincial sales tax applies on GST. Effective combined rate is 12.875% in Québec and 15.5% in PEI.
- As part of the HST (combined rate is 13% with GST).
Nova Scotia Budget Report 2009 is a publication of BDO Dunwoody LLP on developments in the area of taxation. This material is general in nature and should not be relied upon to replace the requirement for specific professional advice. For additional information, contact your BDO advisor or visit us at www.bdo.ca.
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© 2009 BDO Dunwoody LLP
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