2011 Nova Scotia Budget Report
April 5, 2011
Highlights
- Deficit of $390 Million Projected for 2011-12
- Balanced Books by 2013-14
- Tax Rate on Corporate Small Business Income Falls to 4% in 2012
- Personal Tax Credits Increased
“Making Life Better for Families”
On April 5, 2011, the Honourable Graham Steele presented his third budget as Nova Scotia Finance Minister. In last year’s budget, the Minister announced a four year plan to bring the province’s books back into balance, and this year’s budget is a continuation of the plan. With the increase in the HST rate last year, no major tax increases were needed this year.
The deficit of $222 million predicted for the 2010-11 fiscal year in last year’s budget is now expected to be a surplus of $447 million. As some of the surplus is due to unusual one-time revenues, a deficit of $390 million is forecast for the 2011-12 fiscal year (only slightly higher than the $370 million deficit predicted in last year’s budget). The Minister confirmed that the province is still on track to balance the budget duringthe 2013-14 fiscal year.
There appears to be two main themes in today’s budget – improving service and shortening wait times for health care and improving the business environment in Nova Scotia.
In terms of health care, the focus will be on continuing the Better Care Sooner plan. A central theme of today’s budget is to support the initiatives that have already started, or will be starting in the 2011-12 fiscal year. These initiatives include funding for collaborative emergency centres, improving care for seniors and funding to support major hospital and community health care projects.
In a speech made before the budget, the Minister recognized that Nova Scotia’s average growth over the last 20 years was lower than each of the other provinces in Canada. The plan for improving growth has a focus on learning, innovation and competitiveness through the jobsHere program that was announced last November. This new workforce strategy will help workers build new skills, adapt to new technologies, maximize their career opportunities and learn about their employment options.
On the tax front, the most important measure is the reduction of the small business corporate income tax rate from 4.5% to 4% in 2012.The Minister also pointed out in a pre-budget speech that more reductions are possible once the province’s fiscal position is back on a sound footing.
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
2010/2011 |
Revised
Forecast 2010/2011 |
Estimate
2011/2012
|
Revenue |
8,391 |
8,799 |
8,524 |
Expenses |
(8,085) |
(7,915) |
(8,452) |
Debt servicing costs |
(959) |
(879) |
(885) |
Consolidation and accounting adjustments
for
governmental units |
82 |
85
|
69
|
Net income from government business
enterprises |
349 |
357 |
354 |
Provincial surplus (deficit) |
(222) |
447 |
(390) |
PERSONAL TAX CHANGES
Personal Income Tax Credits
Today’s budget will bring a small measure of tax relief to all Nova Scotians in 2011 through increasing the personal tax credit amount by $250 from $8,231 to $8,481, an increase of approximately 3.04%. This will save approximately $22 of Nova Scotia tax at the lowest Nova Scotia tax rate of 8.79%. In addition, a number of other non-refundable personal tax credits, including the spouse or common-law partner credit and the dependent, pension income, disability, caregiver, age, and infirm/dependents age 18 or older credits will increase proportionately.
Tax Reduction for Low-Income Seniors
In 2010, the government announced a tax reduction for seniors who receive the Guaranteed Income Supplement (GIS). Under this measure, approximately 18,000 seniors who received the GIS in 2010 will received a refund in the fall of 2011 of the full amount of provincial income tax paid. The government will administer this measure by using 2010 tax returns to assess eligibility and process the refund.
Affordable Living Tax Credit and Poverty Reduction Credit
The Nova Scotia Affordable Living Tax Credit and the Poverty Reduction Credit are non-taxable, quarterly payments made directly to taxpayers to make life more affordable for low-income individuals and families. The budget proposes to increase these credits by 2.2%, effective July 1, 2011.
BUSINESS TAX CHANGES
Small Business Tax Rate Reduced
The government announced a tax rate reduction that will benefit small businesses. Effective January 1, 2012, the small business tax rate will be reduced from 4.5% to 4%. This reduced rate applies to the first $400,000 of active business income for Canadian-controlled private corporations (including associated corporations) with taxable capital of $10 million or less in the prior year. The benefit of this rate is partially reduced where taxable capital in the prior year exceeds $10 million and is eliminated where taxable capital in the prior year exceeds $15 million.
Large Corporations Tax
As announced in the 2006-07 budget, Nova Scotia’s Large Corporations Tax on capital of
non-financial institutions will decline from 0.1% to 0.05% on July 1, 2011. This tax will be eliminated on July 1, 2012.
Film Industry Tax Credit and Digital Media Tax Credit Changes
In an effort to ensure Nova Scotia’s film, television and new media industry continues to be one of the most competitive in Canada, the government announced changes to the Film Industry Tax Credit and Digital Media Tax Credit in December 2010.The budget reaffirmed the government’s commitment to the film industry and these credit programs. The province removed the total production costs cap for the Film Industry Tax Credit. This change will encourage producers to hire locally as it will allow them to claim between 50% and 65% of eligible Nova Scotia labour without any cap. As well, residency requirements for both credits were changed so that someone only has to be resident in the province during the production period. These changes will be effective for productions starting on or after December 1, 2010.
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 April 5, 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 5, 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.
