Tax Brief: Newfoundland and Labrador Provincial Budget 2011
April 7, 2011
By Adrienne Mercer, at McInnes Cooper
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On April 19, 2011, the Honourable Tom Marshall, minister of finance and president of the treasury board, presented Budget 2011 – Standing Strong: For Prosperity. For our Future. For Newfoundland and Labrador. In the Budget, the minister estimates a surplus of $485 million for 2010-2011, largely as a result of high crude oil prices and increased production at the Province’s three offshore oil fields. The 2010 net provincial debt is expected to be $8.2 billion, representing a 31 per cent decrease since 2004-2005.
For 2010, the minister reports:
• Real GDP growth of 5.6 per cent;
• Investment increase of 32 per cent;
• Employment growth of 3.3 per cent.
For 2011-2012, the minister forecasts:
• A surplus of $59 million, based on crude oil prices of $108 per barrel;
• Further GDP growth of three per cent;
• Capital investment increase of 27.2 per cent;
• Employment increase of three per cent.
The following is a review of the taxation measures and changes described in the Budget as well as other Budget highlights.
Corporate taxation in the Province is unchanged under the 2011 Budget with the exception of an increase in the payroll tax exemption threshold from $1 million to $1.2 million. This increase will be retroactive to January 1, 2011. Approximately 90 businesses are expected to be removed from the payroll tax roll as a result, and approximately 845 other businesses will see a reduction in payroll tax. The collective value of this announcement to employers is expected to be $2.3 million.
The 2011 Budget does not provide for personal income tax cuts. However, the Budget does provide certain rebates and non-refundable tax credits to eligible individuals:
• A Residential Energy Rebate to become effective on October 1, 2011, will reduce all residential electricity and heating costs by eight per cent. This rebate is applicable to all residents regardless of income and will be based on the total cost of residential energy, including electricity, furnace oil, stove oil and propane. This is a new rebate in addition to the Home Heating Rebate Program and is anticipated to have a cost of $38 million;
• A non-refundable Child Care Tax Credit for the 2011 taxation year equal to 7.7 per cent of allowable child care expenses to a maximum of $7,000 for eligible children under seven years old and $4,000 for eligible children between the ages of seven and 16 years. The maximum benefit under this credit will be $539 per child under seven years and $308 per child between seven and 16 years. Eligible expenses are child care expenses that are allowable under line 214 of a personal tax return and include amounts paid for the care of a child so that a person can gain employment income, operate a business, or attend a qualifying education program. This tax credit will be in addition to deductions currently available and will have a total cost of approximately $3 million;
• A non-refundable Volunteer Firefighters’ Tax Credit to a maximum benefit of $231 per volunteer firefighter who performs at least 200 hours of volunteer service per year.
The Budget announces government spending in various sectors and on various initiatives. The following is a brief overview of some of the highlights and is not intended to address all spending announcements.
The Budget announces a $348 million investment in Nalcor Energy to support energy development investments, including the Lower Churchill Project.
The Budget confirms more than $1 billion this year to the current infrastructure program. This includes investments of $216.4 million for roads and bridges, including repair for roads damaged by Hurricane Igor, $38.7 million for public buildings and $56.4 million for marine infrastructure.
The Budget commits funding to the Innovation Strategy, to the Aerospace and Defense Development Fund and to address gaps in broadband availability and advanced internal telecommunications in under-serviced areas. In addition, the Budget provides for an investment of $128 million in business development programs and services for small and medium size businesses as well as investments in the mining, forestry, agriculture, aquaculture and fisheries sectors.
CHILD CARE AND EDUCATION
In addition to the Child Care Tax Credit, the Budget announces a two-year pilot project for the development of child care spaces in family homes and commits to an increase in start-up grants to become a regulated family child care provider and infant start-up grants for child care providers where all children are under the age of two years. The Budget also commits to an initial amount of $1.3 million and a total of $4.8 million over three years, for initiatives under the Early Childhood Learning Strategy.
The Budget commits $94.5 million for new and continuing K through 12 infrastructure. $6.4 million is committed to maintaining the tuition freeze at Memorial University and College of the North Atlantic for the 2011-2012 academic year, with additional investments for post-secondary infrastructure. $15.4 million over three years is to be allocated to incentive programs for employers to hire apprentices.
The Budget announces a total investment of close to $140 million for new and existing poverty reduction initiatives, including an Adult Dental Health Care Program, the Supportive Living Community Partnership Program, the Housing Corporation’s Rent Supplement Program and Education Incentive Program and the Employment Transitions Program.
The Budget announces funding for the health care sector to reduce wait times, to increase access to care, to develop e-mental health and enhance tele-mental health services, to invest in long-term care and community support systems, to improve access to health care professionals and to invest in health care infrastructure.
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