The Prince Edward Island government has tabled a $1.7 billion budget with a $9.6 million deficit. Retailers are disappointed that the government decided to increase the HST from 14 percent to 15 percent. The government has also delayed balancing the budget for another year while increasing program spending by 3.3 percent.

In recent years, retailers have become increasingly concerned with the growing costs of doing business in Prince Edward Island. PEI retailers have always been faced with the challenge of keeping Island residents from shopping in New Brunswick, Nova Scotia or online. For years, many PEI retailers had a regional tax advantage as the province exempted clothing and footwear from the provincial consumption tax. The introduction of a 14 percent HST in 2013 harmonized the tax system for retailers in the region and lowered consumption taxes on some products. However, with the implementation of the HST a point of sale rebate was only awarded to children’s clothing and footwear, thus the cost of apparel increased by nine percent. Even with the tax change in 2013, PEI retailers still had an HST tax advantage within the Maritimes. Regrettably, the announcement that the HST will move to 15% on October 1, 2016, eliminates the tax advantage for PEI retailers. PEI will now have the same HST as Nova Scotia and New Brunswick.

While taxes and fees have continued to increase in PEI, government has not taken a meaningful approach to reducing expenditures. Despite repeated promises from the current government to balance the budget, the government does not appear willing to make the necessary decisions to reduce expenditures.

Background:

Measures bearing on consumer spending or on retail goods and employment include:

  • The basic personal income tax exemption for 2016 will go up to $8,000 from $7,708. This will be the first increase since 2008 and could impact 84,000 taxpayers.
  • The PEI portion of the HST rebate will be increased to 10 percent on October 1, 2016. Only low income Islanders are eligible for this credit.
  • The HST increase is projected to add $11 million in revenue in 2016-17 and another $22 million in 2017-18.

Other items of note:

  • Real GDP: growth is expected to be 1.2% for 2015 and at 1.4% for 2016.
  • Net Debt: is expected to be $2.18 billion for 2015-16 and $2.2 billion in 2016-17.

Next Steps:

RCC continues to express concern with the PEI government’s ongoing actions with impact on the business community. Minimum wage increases that are not tied to inflation, tax increases and annual broken promises to eliminate the deficit do not create a positive environment for retail businesses across PEI. RCC will continue to express its opposition to the HST increase while monitoring the government’s progress in keeping expenditures in check so as to finally balance the budget in 2016-17.

If you have any questions or concerns, please don’t hesitate to contact: Jim Cormier, Director (Atlantic) at: jcormier@retailcouncil.org or 902-422-4144