2010 Prince Edward Island Budget Report
April 23, 2010
Highlights
- Deficit of $84.2 million now forecast for 2009-10 fiscal year
- Deficit of $54.9 million projected for 20010-11 fiscal year
- No new income tax changes announced
- Budget to be balanced over a four-year period
- Corporate income tax reduction plan concludes on schedule
Securing the Future
On April 23, 2010, the Honourable Wesley J. Sheridan tabled his fourth budget as Treasurer of Prince Edward Island. Unlike many of the budgets presented this year, the deficit amounts first announced last year have remained in check. The deficit for the 2009-2010 fiscal year is now projected to be $84.2 million, down slightly from the original estimate of $85.3 million. For the 2010-2011 fiscal year, the estimated deficit will be reduced by approximately $30 million to $54.9 million. The Treasurer stated that the budget will be balanced over a four-year period.
The deficit reductions will apparently not come from tax increases, as the Treasurer announced today that there will be no tax increases. According to the budget papers, tax revenue will increase by
$35.4 million or 5.2% (from $677.3 million for 2009-2010 to $712.7 million for the 2010-2011 fiscal year). The Treasurer estimates that the province’s economy grew by 0.5% in 2009 and will grow by 2% in 2010. This growth will be the key in terms of meeting the revenue targets and balancing the budget over the next four years.
On the spending side, program spending will only increase by
$4.7 million or less than 1%. The Treasurer has set bringing kindergarten into the public school system, transitioning the early childhood sector for a sustainable future, enhancing the delivery of health care to Islanders and securing the primary industries of agriculture, fisheries and tourism as the Government’s main priorities for the coming year. That said, the largest single new investment this year will be the decision to bring kindergarten into the public school system. This September, over 1,400 children will begin a full-day kindergarten program in public school.
The following is a summary of tax changes of interest to our clients that will apply for 2010.
|
Prince Edward Island Consolidated
Projection
(in millions $)
|
|
|
Budget
Estimate 2009/2010
|
Revised Forecast 2009/2010
|
Projected
2009/2010
|
|
Revenue
|
1,401.5
|
1,419.4
|
1,461.0
|
|
Program
expenditures
|
(1,331.4)
|
(1,360.0)
|
(1,364.6)
|
|
Interest charges
on debt
|
(114.3)
|
(101.5)
|
(110.0)
|
|
Net amortization
|
(41.1)
|
(38.9)
|
(41.3)
|
|
Consolidated Deficit
|
(85.3)
|
(84.2)
|
(54.9)
|
|
Note that figures for the 2009-2010 fiscal year have been restated to conform with the 2010-2011 fiscal year budget presentation.
|
Personal Tax Changes
Personal Tax Credits and Rates
No new personal tax changes were announced, so tax rates for 2010 will remain at the same level as 2009 (since PEI tax brackets are not indexed), as follows:
2010 Tax Bracket Thresholds and Rates
|
Income
Range
|
|
Tax
Rate
|
$0
to $31,984
|
|
9.8%
|
$31,984
to $63,969
|
|
13.8%
|
$63,969
and over
|
|
16.7%
|
Surtax
rate (applies on basic PEI Tax in excess of $12,500)
|
10%
|
Personal tax credit amounts will also remain unchanged - key amounts are set out below.
2010 Non-Refundable Tax Credit Amounts
|
|
Amount
|
Basic
Personal Amount
|
|
$7,708
|
Spousal
Amount
-
Income Threshold
|
|
6,546
655
|
Age Amount
- Income Threshold
|
|
3,764
28,019
|
Corporate Tax Changes
Small Business Income Tax Cuts Completed
Despite the continuing deficits announced this year, the final stage of the reduction to the PEI small business corporate income tax rate was completed on schedule, with the final reduction of the small business tax rate from 2.1% to 1.0% on April 1, 2010. This leaves PEI with one of the lowest small business rates in Canada.
How PEI Compares
The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to April 23, 2010.
|
|
Top 2010
Personal Rates
%
|
2010 Corporate Rates
|
|
|
|
General
%
|
M&P
%
|
Small Business
%
|
Provincial
Retail Sales
Tax
%
|
|
BC
|
43.70
|
28.50
|
28.50
|
13.50
|
7.00(8)
|
|
Alta.
|
39.00
|
28.00
|
28.00
|
14.00
|
-
|
|
Sask.
|
44.00
|
30.00
|
28.00
|
15.50
|
5.00
|
|
Man.
|
46.40
|
30.00
|
30.00
|
12.00(1)
|
7.00
|
|
Ont.
|
46.41
|
32.00(2)
|
30.00(2)
|
16.50(2)
|
8.00(8)
|
|
Qué.
|
48.22
|
29.90
|
29.90
|
19.00
|
7.50(9)
|
|
NB
|
43.30
|
30.00(3)
|
30.00(3)
|
16.00
|
8.00(10)
|
|
NS
|
50.00
|
34.00
|
34.00
|
16.00
|
8.00(11)
|
|
PEI
|
47.37
|
34.00
|
34.00
|
12.00(4)
|
10.00(9)
|
|
Nfld.
|
43.40(5)
|
32.00
|
23.00
|
15.00(6)
|
8.00(10)
|
|
Yukon
|
42.40
|
33.00
|
20.50
|
15.00(7)
|
-
|
|
NWT
|
43.05
|
29.50
|
29.50
|
15.00
|
-
|
|
Nunavut
|
40.50
|
30.00
|
30.00
|
15.00
|
-
|
- The combined small business rate will be reduced to 11% on December 1, 2010.
- The Ontario corporate rates will be reduced on July 1, 2010. The general business rate will be 30%, the M&P rate will be 28% and the small business rate will be 15.5%.
- The combined general business and M&P rates will be reduced to 29% on
July 1, 2010.
- The combined small business rate was reduced from 13.1% on April 1, 2010.
- There will be a mid-year reduction in the top personal tax rate resulting in a top rate of 43.4% for 2010. The rate reduction will impact payroll deductions beginning July 1, 2010.
- The combined small business rate was reduced from 16% on April 1, 2010.
- The tax rate for M&P profits eligible for the small business deduction is 13.5%.
- The provincial sales tax will be harmonized with the GST on July 1, 2010 (combined rates will be 13% in Ontario and 12% in BC).
- Provincial sales tax applies on GST. Effective combined rate is 12.875% in Québec and 15.5% in PEI.
- As part of the HST, the combined rate is 13% with GST.
- As part of the HST, the combined rate is 13% with GST and will increase to 15% on July 1, 2010.
The information in this publication is current as of April 23, 2010.
Prince Edward Island Budget Report is a publication of BDO Canada LLP and
BFM Chartered Accountants 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. Additional informational can be obtained from BFM.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.
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