In Newfoundland & Labrador, the economy continues to flounder due to the ongoing price challenges in the oil and gas industry. With a Fall election looming, the government delivered a difficult budget that includes a 2% increase in the HST, effective January 1, 2016. The increase, from 13%-15% will be difficult on retailers and put Newfoundland & Labrador in the unenviable position of being tied with Nova Scotia for having the highest HST in Canada. However, low-income earners will reap the benefits of an "enhanced" HST rebate starting in October 2016 while municipalities will receive an HST rebate of 57.14% (see details below). RCC has consistently warned the government and the opposition of the negative effects of an HST increase. RCC will now advocate for the HST to be returned to its level of 13%.

In an effort to diminish the cross-border purchase of cigarettes between western Labrador and Quebec, the government will reinstate the tax rebate on tobacco purchased in this part of the province (see details below).

The deficit for 2014-15 is $924.1 million, which is $8 million more than the mid-year prediction due to the collapse of oil prices. For 2015-16, the deficit is projected to be $1.1 billion.

The province is predicting that by 2019, the price for oil and minerals will finally return to a level where the government will be able to balance its budget by 2020-21.

Net debt is expected to grow to $11.5 billion by the end of 2015.

The government will be eliminating 1,420 public service positions over a period of five years. The plan is for most of these job cuts to be achieved through attrition. This will likely have a negative impact on retailers who conduct business in communities with a significant number of provincial government employees.

Other budget items of note:

HST details:

Individuals and families that make less than $30,000 will receive the full benefit of the HST rebate which will incrementally decrease as household income rises.

Following the Budget address, the Leader of the Opposition immediately went on record stating that if he becomes Premier in this Fall’s election, he will reverse the HST hike.

For building supply retailers, the announcement of the HST increase will be compounded by the government’s decision to put eight major construction projects on hold and lower total infrastructure spending to 2009 levels. However, some of these losses could be offset by municipal spending on capital projects, stemming from the increased municipal funding in today’s budget.

Tax Rebate on Tobacco in Labrador West:

Effective May 1, the government will rebate 10.75 cents of the 23.5 cents it taxes every cigarette sold to retailers in Labrador border zones. This will result in a drop in price of $2.15 per pack of 20 cigarettes. The government will also reinstate the rebate for tobacco – other than cigarettes and cigars – in the Labrador border zones (23.36 cents per gram on the 38 cents per gram that it charges in taxes on these products). This will cost the province approximately $1.4 million but the government is confident that this cost will be offset by the increased tax revenues resulting from fewer residents crossing the border for cheaper cigarettes in Quebec.

Personal Income Tax:

The government will create two new personal income tax brackets. Those with an income between $125,001 and $175,000 will see their tax rate increase to 14.3%. Those earning greater than $175,000 will see their top rate tax increase to 15.3%.

Fee Increases:

Fees are increasing on items such as vehicle registrations, hunting licenses and campsites.

Government Program Cuts:

The Residential Energy Rebate program, which helps offset the cost of home heating, will be eliminated on July 1, 2015. The program was introduced in 2011 and resulted in all residents getting a rebate equal to the provincial portion of HST.

There will be no change in the Home Heating Rebate program for low-income earners.

Infrastructure Spending:

The province’s total infrastructure spending — on roads, hospitals, schools — is set at about $661 million for 2015-16, a drop from more than $700 million budgeted last year. 

However, the province has spent approximately $6 billion on infrastructure over the past eleven years.

Municipalities:

Municipalities will receive a transfer of gas tax funds (phased in over three fiscal years); municipal operating grant levels will be maintained for the next three years.

Regional Governance:

By late 2015, a new advisory committee will begin consultations to explore the potential for a new regional governance structure for neighbouring communities.

Transportation:

The province cancelled its 2013 call for proposals for a single contractor to provide freight and passenger services for two locations in Labrador.

If you have any questions or concerns, please don’t hesitate to contact: Jim Cormier, Director Government Relations (Atlantic) at: [email protected] or 902-422-4144