New Brunswick Budget: Slow Progress, No New Taxes / Small Business Tax Cut
The New Brunswick government tabled a budget featuring no tax increases or program cuts. The budget will see investments in tourism, education and healthcare while making slow but steady progress in reducing its deficit. The government is committed to balancing its budget by 2020-21 yet the province’s $13 billion debt will continue to grow. The highlight of the budget was a decision to further lower the small business tax rate from 3.5% to 3% and a commitment to move the rate to 2.5% by the end of the government’s mandate in 2019.
Last year, the province lost its competitive tax advantage in the Atlantic region through increases to personal and corporate taxes as well as the HST. The lowering of the small business tax is welcomed but RCC continues to remind the New Brunswick government that once the province’s fiscal house is in order, businesses need tax relief.
Local Food: The government has committed to implement a local food and beverages strategy to promote consumption of locally produced food and beverages. No details were provided but RCC spoke to officials at the Department of Agriculture who committed to consult with grocery retailers on this strategy.
The province has experienced slow but steady growth in jobs and GDP since 2015. However, there is much debate over the types of jobs created versus the types of jobs that have been lost. Retail sales are projected to increase by 3.2% in 2017. However, projected growth across the economy is dependent on increased public sector investment (heavily dependent on the federal government), a rebound in exports and economic stimulus from the construction of the Energy East Pipeline. Given the political climate in Canada and the USA regarding trade and pipelines, New Brunswick’s projections for growth may be overly optimistic. Also, given the province’s commitment to develop a made in New Brunswick carbon pricing mechanism (following consultation), continued growth for the province is not guaranteed.
Deficit: The deficit for the 2016-17 fiscal year is $231.1 million. The government has reduced the deficit by $130 million over the past two years. Last year’s deficit was initially projected at over $430 million but this number was inflated due to the fact that 2016-17 was the final year where the government included a $150 million annual contingency fund to cushion against unexpected costs or revenue shortfalls. For 2017-18, the government is projecting a deficit of $191.9 million. The deficit numbers for 2016-17 and 2017-18 will likely be impacted by the ever increasing costs from the recent ice storm in northeastern New Brunswick.
The long term plan is to balance the books by 2020-21.
Net Debt: The net debt is $13.659 billion and is expected to grow to $13.997 billion for 2018.
2017-18: Revenues are projected to increase by 4.1% while expenditures will increase by 3.6%.
For 2017, the Department of Finance expects real GDP growth of only 0.6%.
HST revenue: for 2016-17 decreased by 9% despite last year’s 2% increase in the tax.
Tourist Areas: The budget for the Department of Tourism Heritage and Culture will increase by 17.6% and a comprehensive tourism strategy will be released in 2017. This investment should have an indirect impact on retailers in tourist destinations throughout the province.
Government stated its commitment to regulatory reform / harmonization with its Atlantic counterparts.
RCC will continue to oppose last year’s tax increases, pointing to the correlation between last year’s HST increase and the lower than expected HST revenues for the past fiscal year. RCC will also continue to call on the government to make greater efforts to reduce expenditures in order to balance its budget.
RCC will follow up with the Department of Agriculture to gain further information regarding the consultation process leading to implementation of a local food and beverages strategy promoting consumption of locally produced food and beverages.
If you have any questions or concerns, please don’t hesitate to contact: Jim Cormier, Director (Atlantic) at: firstname.lastname@example.org or (902) 422-4144