PEI Produces Second Consecutive Balanced Budget – Increases Spending – Modest Tax Relief
Last week, the Prince Edward Island (PEI) government tabled its second consecutive balanced budget. The budget featured a 5.7% increase in spending, a 0.5% decrease to the small business corporate income tax rate and a $500 increase in the Basic Personal Income Tax Exemption threshold for each of the next two years.
Retail Council of Canada (RCC) is pleased that the PEI government has balanced its budget and provided minor tax relief. In recent years, the economic climate in PEI has improved, with continued gains in both employment and personal incomes on the Island. For retailers, the improved economy has resulted in a 7.4% increase in retail sales for 2017.
However, RCC is concerned that in this year’s budget, government has chosen to increase spending as opposed to providing more meaningful tax relief to PEI retailers. Over $43 million of this year’s forecasted revenue increase is expected to come from income tax, property tax, sales tax and corporate tax.
Measures bearing on consumer spending or on retail goods and employment include:
Deficit / Debt: The surplus for the 2017-18 fiscal year is $1.2 million. For 2018-19, the government is projecting a $1.5 million surplus on a budget of $1.9 billion. The debt for 2017-18 is $2.2 billion for a population of almost 150 thousand people. If capital spending is taken into account, the provincial net debt will grow by $56.5 million this year. Federal transfers are up $60 million over last year’s estimates.
Taxes: The budget also featured two $500.00 increases in the basic personal tax exemption. For 2018-19, the threshold will move from $8,160 to $8,660 and in 2019-20, the threshold will move from $8,660 to $9,160. The exemption level is still very low as most Canadian provinces have exemption levels at over $10,000.
For 2018, the small business tax rate will be reduced by 0.5% to 4%. The government has committed to continue reducing this rate in the near future.
Tax Credit: The budget includes a new Small Business Investment Grant. Businesses will be eligible for a 15% rebate on the purchase of new equipment or technology up to $25,000.
Bracket Creep: Given that PEI – along with Nova Scotia – is one of only two provinces in Canada that does not index its personal income tax brackets, Islanders will continue to be penalized for their success through bracket creep.
Low Income Assistance: The budget for the low-income Food Rate Allowance will increase by $420,000.
Affordable Housing: The budget will allocate $17 million in additional funding over the next two years to build and renovate affordable housing units.
Home Heating: The provincial portion of the HST will be rebated on firewood, pellets and propane used for home heating through a point of sale credit or a rebate.
Rural Growth: The budget provides $2.6 million to help revitalize rural communities through initiatives like improved high-speed Internet and increased support to help new Canadians settle and adapt to life in rural PEI.
Real GDP: growth for 2017 is 2.2%.
RCC will congratulate the government for its second balanced budget but will remind the government of the need to keep Departmental expenditures in check. RCC will continue to push the government on the need to provide more meaningful tax relief to the retail community.
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