The 2017-18 Newfoundland and Labrador budget will only provide minor relief from the significant tax and fee increases introduced in last year’s budget. Newfoundland and Labrador remains one of the highest taxed provinces in the country. Despite recent efforts to reduce government spending and the size of civil service, the government continues to spend beyond its means. The government seems to be banking on a sustained rebound in the price of oil to allow it to address its billion-dollar deficit and crippling debt load. For retailers, the only good news items from the budget include:
- A commitment to reduce the highly unpopular provincial fuel tax, which currently sits at 33 cents per litre.
- No additional job losses (for now) in the civil service, which helps maintain disposable income in communities.
Oil Revenue: After months of trepidation regarding another difficult budget and additional government job losses for 2017-18, recent increases in the price of oil allowed the Newfoundland and Labrador government to table a budget which featured no new taxes and no government job losses.
Government Spending: The government has been criticized for not taking decisive action to cut spending and reduce the size of government. Despite shedding 300 civil service jobs over the past year and freezing all non-union salaries, the government is still running huge deficits while continuing to employ the highest percentages of civil servants per capita in the country.
The progress toward deficit reduction in this year’s budget is predicated on government being able to reduce spending by almost $300 million from government Departments and then holding the line on spending for the next five years. Critics are not convinced that government will be able to achieve this goal given that government is forecasting an 11% increase in inflation over the next four years. The budget projections are also reliant on the price of oil continuing its upward trend.
Gas tax: The government committed to lower the provincial fuel tax by 8.5 cents per litre on June 1, 2017, and another 4 cents per litre on December 1, 2017. This follows last year’s decision to increase the tax from 16.5 cents per litre to 33 cents per litre.
Corporate / Personal Taxes and HST: Last year’s significant increases to the HST, corporate taxes, personal income taxes as well as the creation / increase to 350 fees all remain in place.
Book tax: Last year’s unpopular decision to charge the full HST on books purchased by individuals remains in place. Newfoundland and Labrador remains the only province in Canada that does not rebate the provincial portion of this tax at the point of sale.
Deficit / Debt: The deficit for the 2016-17 fiscal year is $1.1 billion. For 2017-18, the government is projecting a deficit of almost $778 million on a budget of $8.1 billion. The debt for 2016-17 is $15.2 billion for a population of only 530 thousand people. The province has the highest net debt per capita in Canada and paying interest on the debt is the government’s second largest expense item.
The temporary deficit-reduction levy came into effect on July 1, 2016. This levy remains in effect until December 2019 and is incremental (based on income). It applies to people earning over $50,000.
The long-term plan is to balance the books by 2022.
Budget Investments: The government made minor investments into the following Departmental programs that will be of interest to grocery retailers:
Agriculture: The government will invest $3.9 million to continue the five-year, $37 million Growing Forward 2 initiative. This is a cost-shared project with the Federal Government that plans to double the amount of land used for agriculture by freeing up Crown Land.
Budget 2017 is also committing $3.25 million to the Provincial Agrifoods Assistance Program to continue developing existing agriculture land, and improve the province’s food self-sufficiency.
Fisheries / Aquaculture: The government will invest $5 million in the wild fishery and aquaculture industries. This funding will leverage investment from the private sector and the Federal Government to support technology and innovation in harvesting processing, aquaculture and marketing.
RCC will continue to oppose the tax increases while working with stakeholders to push the Newfoundland and Labrador government to develop a plan to grow the economy that is not so dependent on oil and gas.