Stand Pat Budget For Newfoundland and Labrador: Huge Financial Concerns Remain
The 2018-19 Newfoundland and Labrador budget has no plan of action to deal with the province’s huge deficit and staggering debt. Newfoundland and Labrador remains one of the highest taxed provinces in the country. The government continues to spend beyond its means, banking on a sustained rebound in the price of oil to allow it to address its precarious financial situation. For retailers, the only notable tax change from the budget included an increase in the threshold for the provincial payroll tax from $1.2 million to $1.3 million. This will save up to $2,000 for employers, while 50 businesses will be dropped from the tax roll.
Although not announced in this year’s budget, RCC members are reminded that as of January 1, 2018, the government finally reversed its unpopular 2016 decision to charge the full HST on books purchased by individuals. Newfoundland and Labrador was the only province in Canada to not rebate the provincial portion of this tax at the point of sale. RCC had advocated strongly against this tax and thus, we were pleased with the rebate reinstatement.
Oil Revenue: Oil royalties are expected to be at approximately $1 billion for the fiscal year. The province will create a stand-alone Crown Corporation to focus specifically on growing the province’s oil and gas industry.
Government Spending: The government has been criticized for not taking decisive action to cut spending and reduce the size of government. The government has eliminated 795 positions in government over the past two years but the number of provincial civil servants is still 45% higher than the national average. The government’s current plan to reduce the size of government is through attrition. The government noted that there are currently more than 5,000 public service employees who are currently eligible to retire.
Corporate/Personal Taxes/HST: 2016’s significant increases to the HST, corporate taxes, personal income taxes, as well as the creation/increase of hundreds of fees remain in place.
Deficit / Debt: The deficit for the 2017-18 fiscal year is $812 million. For 2018-19, the government is projecting a deficit of almost $683 million on a budget of $8.4 billion. The estimated debt for 2018-19 is $15.5 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 (behind only health care).
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. Other than the government’s plan to reduce the size of the civil service through attrition, the government’s plan to return to a balanced budget relies almost exclusively on growing the economy and somehow spending $450 million less in 2022 than it will spend in this fiscal year. In the next fiscal year, there will be little action taken to curb spending.
Automobile Insurance: This tax will be reduced from 15% to 13% on January 1, 2019. The tax will then be decreased by an additional 1% per year from 2020-2022 until it reaches 10%.
Infrastructure: $619 million in capital infrastructure commitments to build / renovate hospitals, schools, roads, water and waste water.
Injured Workers: As of April 1, 2018, the government will enhance the benefits available to injured workers and their families by increasing the income replacement rate from 80% to 85%. The Maximum Compensable Assessible Earnings for 2018 has moved to $64,375.
Housing Supports: Over $39 million has been committed to help first time buyers purchase a home; to help with maintenance, repair and upkeep of public and rental housing; and to develop more affordable housing options.
Disaster Assistance: $12.4 million for the Newfoundland and Labrador Disaster Financial Assistance Arrangement Program. This is notable for RCC members as retailers are often asked to assist with relief efforts following disasters.
Immigration: Investing an additional $2.6 million in an immigration program with a goal of increasing immigration by 50% by 2022.
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.
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