New Brunswick's ongoing economic struggles resulted in tabling of a budget featuring two percent increases in both the Harmonized Sales Tax (HST) and the general income tax rate. There will be no highway tolls.
RCC responded to the budget with public comments describing the negative impact of an HST increase on consumer spending; and the negative impact of corporate tax increases on attracting and retaining business in New Brunswick. RCC also expressed frustration that despite two years of budget cuts followed by today’s announcement of significant tax increases, the province’s deficit will remain virtually unchanged.
HST: will increase from 13-15% on July 1, 2016 (provincial portion moves from 8-10%). This will put New Brunswick's HST at the same level as Nova Scotia's HST and similar to Quebec's, which sits at 14.975%.
Daily necessities like basic groceries are exempt from the HST.
HST Credit: There will be a refundable provincial HST credit of $300 for individuals; $300 for spouse or equivalent and $100 per child under the age of 19. The credit will also apply to the first child of a single parent family. The full HST credit will be provided to New Brunswickers with a family income of less than $35 thousand per year. The credit will be reduced by 2 cents for every dollar of income above $35 thousand per year.
The HST increase is projected to generate $300 million annually for the province.
General Corporate Income Tax Rate: will increase from 12-14%, which matches the rate in Newfoundland and Labrador while remaining lower than the 16% rate in NS and PEI.
Small business tax rate: No increase.
Tobacco tax: will increase by 6.52 cents per cigarette or gram of loose or fine cut tobacco over the next two years. This will bring the tax rate from 19 cents to 25.52 cents, which will be the same as NS.
An initial increase of 3.26 cents will be effective midnight February 2, which will bring the rate to 22.26 cents per cigarette or gram of loose or fine cut tobacco. On February 1, 2017, the second increase of 3.26 cents will occur.
Government will establish a dedicated enforcement unit to disrupt the sales of contraband tobacco.
Once fully implemented, budget revenue measures will generate in excess of $230 million annually.
Highway Tolls: Despite public support for highway tolls, government decided against this approach. There was no consensus on where to locate the tolls and it would have taken years for government to recoup the significant investment in setting up and running the toll booths.
Deficit: The deficit for the 2015-16 fiscal year is $466.4 million. This number includes a $150 million annual contingency fund to cushion against unexpected costs or revenue shortfalls. For 2016-17, the government is projecting a deficit of $347 million. However, this number is somewhat misleading as 2016-17 will be the first of a three year plan to diminish the government’s $150 million contingency reserve to $0. The 2016-17 deficit projections only include a $50 million contingency fund, which means that despite all of the extra revenue that the government will be collecting through tax increases, there will only be a minor improvement in the deficit
For 2016, the Department of Finance expects real GDP growth of only 0.4%
The long term plan is to balance the books by 2020-21.
RCC will continue to oppose the tax increases while working with stakeholders to push the NB government to develop a plan to grow the economy.
If you have any questions or concerns, please don’t hesitate to contact: Jim Cormier, Director (Atlantic) at: [email protected] or 902-422-4144