2011 Prince Edward Island Budget Report
April 6, 2011
Highlights
- Deficit of $53.7 Million now Forecast for 2010-11 Fiscal Year
- Deficit of $42 Million Projected for 2011-12 Fiscal Year
- No Income Tax Changes Announced
- Budget to be Balanced in 2013-14 Fiscal Year
“Moving Forward Together”
On April 6, 2011, the Honourable Wesley J. Sheridan tabled his fifth budget as Treasurer of Prince Edward Island. The deficit reported for the 2010-11 fiscal year is $53.7 million, down $1.2 million from last year’s original estimate of $54.9 million. Some improvement is forecast for the 2011-12 fiscal year as the estimated deficit is $42 million. The Treasurer did confirm that the government will still balance the budget by the 2013-14 fiscal year, although no details were provided in the budget papers on how this goal would be met.
In terms of meeting the balanced budget goal while maintaining support for education and health, the Treasurer stated that the province will need to grow a strong and prosperous economy. A key part of this will be the Island Prosperity Strategy which identifies four strategic sectors for growth – biosciences, aerospace, information technology and renewable energy.
Statistics Canada has estimated that the Island’s economy is expected to have expanded by approximately 1.9% in 2010 (compared with growth for Canada as a whole of 3.1%). Growth in 2011 is expected to again be moderate, at approximately 1.7%. One statistic of concern is the fact that a survey of public and private investment intentions indicates that capital expenditures are expected to decline by 3.4% in 2011. Other concerns that impact the Island’s export market include questions around the sustainability of the economic recovery in the United States and the Canadian dollar, which continues to strengthen.
Much of the budget address and papers reviewed the progression of existing plans and there were few new programs announced today, likely owing to the fact that the province’s fiscal position allows little leeway for new programs and tax reductions. New spending was aimed primarily at education and health.
In one tax change, taxes on tobacco and cigarettes will increase at midnight tonight.
Prince
Edward Island Consolidated Projection
(in
millions $) |
|
Budget
Estimate 2010/2011 |
Revised
Forecast 2010/2011 |
Projected
2011/2012
|
Revenue |
1,461.0 |
1,458.7 |
1,489.5 |
Program expenditures |
(1,364.6) |
(1,369.0) |
(1,384.5) |
Interest charges on debt |
(110.0) |
(105.9) |
(108.1) |
Net amortization |
(41.3) |
(37.5) |
(38.9) |
Consolidated Deficit |
(54.9) |
(53.7) |
(42.0) |
PERSONAL TAX
Personal Tax Credits and Rates
No new personal tax changes were announced. Tax rates for 2011 will remain unchanged since PEI tax brackets are not indexed.
2011 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.
2011 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
Corporate Tax Rates
The final reduction of the small business tax rate from 2.1% to 1% was completed last year on April 1, 2010, leaving PEI with one of the lowest small business rates in Canada. There were no corporate rate changes announced in today’s budget. The key rates are summarized below.
2011 PEI Corporate
Tax Rates as at January 1, 2011 |
|
CCPC – Active business income tax
rate |
1% |
CCPC – Active business income
threshold |
$500,000 |
CCPC – Investment income tax rate |
|
16% |
General business income tax rate |
|
16% |
M&P income tax rate |
|
16% |
OTHER TAX MEASURES
Increased Taxes on Tobacco Products
The budget proposes that, effective midnight on April 6, 2011, the tax on a carton of 200 cigarettes will rise by $5.90. As well, the tax on 200 grams of fine cut tobacco will rise by $6.58. It is expected that the increased taxes on tobacco products will raise approximately $4.8 million annually to support public expenditures in health care.
HOW PRINCE EDWARD ISLAND COMPARES
The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to April 6, 2011
|
Top 2011
Personal Rates
% |
2011 Corporate
Rates |
|
|
General
% |
M&P
% |
Small Business
% |
2011
Provincial
Sales
Tax
% |
BC |
43.70 |
26.50 |
26.50 |
13.50 |
7.00(6) |
Alta. |
39.00 |
26.50 |
26.50 |
14.00 |
- |
Sask. |
44.00 |
28.50 |
26.50 |
15.50(1) |
5.00 |
Man. |
46.40 |
28.50 |
28.50 |
11.00 |
7.00 |
Ont. |
46.41 |
28.50(2) |
26.50 |
15.50 |
8.00(6) |
Qué. |
48.22 |
28.40 |
28.40 |
19.00 |
8.50(7) |
NB |
43.30 |
27.50(3) |
27.50(3) |
16.00 |
8.00(6) |
NS |
50.00 |
32.50 |
32.50 |
15.50 |
10.00(6) |
PEI |
47.37 |
32.50 |
32.50 |
12.00 |
10.00(7) |
Nfld. |
42.30 |
30.50 |
21.50 |
15.00(4) |
8.00(6) |
Yukon |
42.40 |
31.50 |
19.00 |
15.00(5) |
- |
NWT |
43.05 |
28.00 |
28.00 |
15.00 |
- |
Nunavut |
40.50 |
28.50 |
28.50 |
15.00 |
- |
(1) The small business rate will be reduced to 13% on July 1, 2011.
(2) The general business rate will be reduced to 28% on July 1, 2011.
(3) The combined general business and M&P rates will be reduced to 26.5% on July 1, 2011.
(4) The small business rate decreased from 16% effective for fiscal periods beginning on or after April 1, 2010.
(5) The tax rate for M&P profits eligible for the small business deduction is 13.5%.
(6) As part of the HST (combined rates are 15% in Nova Scotia, 13% in Ontario, New Brunswick and Newfoundland & Labrador, and 12% in British Columbia).
(7) Provincial sales tax applies on GST. Effective combined rate is 13.925% in Québec and 15.5% in Prince Edward Island.
The information in this publication is current as of April 6, 2011.
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.
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
