2011 Newfoundland and Labrador Budget Report
April 19, 2011
Highlights
- Surplus of $485 Million Projected for 2010-11
- Surplus of $59 Million Forecasted for 2011-12
- Increased Payroll Tax Exemption Announced
- New Energy Rebate for all Households
- New Personal Tax Credit Announced for Child Care Expenses
“Standing Strong: For Prosperity. For Our Future. For Newfoundland and Labrador.”
On April 19, 2011, Finance Minister Tom Marshall presented the first budget of the Newfoundland and Labrador government since Kathy Dunderdale took over from Danny Williams as Premier. This is also the last budget to be presented before the general election scheduled for this October.
In what was not a well kept secret, the Finance Minister reported a large surplus for the 2010-11 fiscal year, amounting to $485 million. Last year's budget had predicted a deficit of $194 million. It would appear that virtually all of the turnaround is due to higher than expected tax and royalty revenue from the resource sector. A surplus of $59 million is predicted for the 2011-12 fiscal year.
The province's economy for 2010 was strong, with real GDP growth of 5.6%, the highest among all of the provinces in Canada. Employment grew by 3.3% to reach total employment of 219,400. This increase brought employment back to pre-recession levels. For 2011, real GDP growth of 3% is predicted.
A number of spending initiatives were announced in today's budget. The cost of program expenditures in the 2011-12 fiscal year will be almost 5% higher than expenditures for the 2010-11 fiscal year. New programs will focus on energy sector investments, infrastructure, innovation, child care, education, health and other programs.
Tax relief was also announced in the budget, including an increased exemption for the provincial payroll tax, a new Residential Energy Rebate and new personal tax credits for child care expenses and volunteer firefighters. In the case of the child care credit, this will be in addition to the child care expense deduction that is already available.
The following is a summary of the more important items of interest to our clients.
Newfoundland
and Labrador Consolidated Statement of Operations
(in millions $) |
|
Original Forecast 2010/2011 |
Revised Forecast 2010/2011 |
Projected
2011/2012
|
| Revenue |
6,585 |
7,283 |
7,124 |
Program Expense |
(6,177) |
(6,176) |
(6,479) |
Interest on Debt |
(809) |
(823) |
(805) |
Net Income of Government
Business Enterprises |
207
|
201
|
219
|
Surplus (Deficit) |
(194) |
485 |
59 |
PERSONAL TAX MEASURES
New Residential Energy Rebate
The budget announced that there will be a new Residential Energy Rebate, effective October 1, 2011, to assist individuals, families and seniors with the rising cost of energy. The rebate will be equivalent to the 8% provincial component of the HST for residential energy generated by home heating fuel, electricity and other energy sources. The rebate will be available to every household in the province. This rebate will be in addition to the current home heating rebate. The rebate program will be administered by the province and the Department of Finance will be consulting with energy suppliers to develop the most cost effective and efficient means to implement the program.
New Child Care Tax Credit
A parent may currently deduct eligible child care expenses from income, up to certain limits. Today's budget will provide additional tax relief in the form of a proposed new non-refundable child care tax credit based on these child care expenses, effective for the 2011 tax year. The non-refundable credit will be equal to 7.7% of the eligible child care expenses deductible from income. The benefit will depend on a child's age and the amount of deductible child care expenses for that child, to a maximum benefit of $539 per child.
New Volunteer Firefighters' Tax Credit
The budget proposes a new Volunteer Firefighters' Tax Credit to allow eligible volunteer firefighters to claim a 7.7% non-refundable tax credit beginning in 2011. The maximum benefit will be $231 per firefighter, based on a tax credit amount of $3,000. This credit will be available for those volunteers who perform at least 200 hours of service each year.
BUSINESS TAX MEASURES
Payroll Tax
The budget proposes to decrease payroll tax by increasing the payroll tax exemption threshold to $1.2 million from $1.0 million, retroactive to January 1, 2011.
Apprenticeship Employment Rebate
The supply of apprenticeships in Newfoundland and Labrador has not kept pace with the demand, especially for traditionally under-represented groups, such as women, aboriginals and persons with disabilities. Over the next three years, additional incentives will be provided to employers to hire apprentices, particularly those from under-represented groups. The details of this Apprenticeship Employment Rebate will be announced in the coming weeks.
HOW NEWFOUNDLAND AND LABRADOR COMPARES
The following chart compares top personal and corporate tax rates and sales taxes for all provinces and territories, as announced to April 19, 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 19, 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.
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