Atlantic Budgets 2022: bikes, film classes and new residents
Posted on April 27, 2022 | By Ashley Fitzpatrick | 0 Comments
On the heels of budget season, it’s worth taking a look back at a bit of the good, the bad and the ugly for Atlantic Canada. In the end, 2022-23 included a lot of not-so-dramatic budget day headlines and no changes in corporate or personal income tax rates across the board. With ongoing cost of living increases, the governments generally did take steps to try and qualify more low-income households for personal tax relief. Housing, childcare and healthcare were pillars, while small and medium-size businesses saw neither mountains of new fees nor phenomenal new incentives, yet each province had their highlights.
Presented on March 29 by Finance Minister Allan MacMaster, the budget for Nova Scotia comes with a projection of a deficit of $506 million in 2022-23. The province’s net debt-to-GDP ratio, a common measure speaking to financial health and ease of borrowing, is climbing and expected to run just shy of 35% this year, on its way to closer to 40% by the mid-2020s. It’s something that might be more alarming, except analysts noted it both leaves net debt-to-GDP below a 47.4% peak hit earlier in the century and comes from capital spending supporting a growing population with the total population, in turn, aging at a reduced rate. As TD economist Rishi Sondhi noted, looking ahead, Nova Scotia’s net debt is projected to increase by about $6 billion from 2021-22 to 2025-26 but with a full 75% of the increase tied to capital spending.
A few other highlights
• M.O.S.T. trades — Nova Scotia has More Opportunities for Skilled Trades, being the name slapped on a tax refund on the first $50,000 of earnings for under-30s working select skilled jobs. Interestingly, as Grant Thornton included in its budget notes, apart from the usual suspects in skilled trades, it is being applied to roles in manufacturing, information technology, film, transportation and the service sector, with full details out some time before the first refunds in 2023-24. The tax refund is part of a collection of actions aimed at recruiting and retaining new immigrants to Nova Scotia to meet labour market needs and add more, young blood. As the Atlantic Provinces Economic Council recently projected, the region will need to fill over 400,000 jobs between now and 2030 due to job creation and retirements, with 43% of job opportunities being in Nova Scotia.
• Deterring non-resident homebuyers — Non-residents are facing a new, $2 tax on every $100 of assessed value of residential properties. Trying not to hit local pockets, the tax won’t be applied where there’s more than three units or on places leased to a local for a year or more (to try and minimize landlords flowing through charges). Apart from the new property tax, Budget 2022 includes a new Deed Transfer Tax of 5% on any residential property purchased by outsiders. It kicks in April 1 but, notably, doesn’t apply to anyone who moves into the province within six months of buying.
On March 22, Finance Minister Ernie Steeves projected a surplus of $35.2 million for New Brunswick in 2022-23. Coming off five years of surpluses, the province stands as the only one in the region not expected to be in the red at the end of the current fiscal. New Brunswick has a net debt-to-GDP ratio expected to fall to 30.1% and keep falling thereafter.
“As the first province to deliver a pandemic surplus (of $409 million in FY 2021-2022) and maintain a positive balance, New Brunswick has plenty of success to build on,” wrote RBC economist Carrie Freestone.
The plan is for spending to increase this year, cutting into the surplus, to add to the capacity long-term in sectors like childcare and healthcare. What’s coming in healthcare, at $3.3 billion, or a 6.4% bump year-over-year, amounts to the biggest jump in health spending since 2008-09. It comes on the heels of the province’s Stabilizing Health Care plan.
Provincial corporate income tax rates are held steady, with New Brunswick and Nova Scotia having matching rates.
A few other highlights
• Property tax phase-in — Over three years, the Government of New Brunswick is bringing in a 50% reduction in provincial property tax for non-owner-occupied houses, apartments and other rental properties. There are also smaller, 15% drops for properties like nursing homes and non-residential. It was unexpected, as KPMG noted, being announced in the 2020 budget but delayed (the credit for that going to COVID-19). Housing rent increases are also getting capped at 3.8%, retroactive to Jan. 1.
• Local governments — New Brunswick has put another $10 million towards the ongoing and meaty process of reorganizing and modernizing local governance. The province is pushing to reduce the number of stand-alone municipal entities serving fewer than 1,000 people (it started in January 2021 with 208 of these versus Nova Scotia’s four). The multi-year reform process has a detailed calendar online. This year, the work will include naming CEOs for 12, regional service commissions and electing councils anywhere where new, local councils are required.
Prince Edward Island
On February 24, Finance Minister Darlene Compton projected a deficit of $92.9 million for P.E.I. in this fiscal year. The province is expecting net debt-to-GDP to increase to 29.8%, still below a peak hit within the last five years. While deficit budgets from the provincial government are projected out at least through 2025, TD’s Sondhi noted, “P.E.I.’s overall fiscal position is healthy and is expected to remain that way in coming years.”
Provincial corporate income tax rates held at 16%, and 1% on the first $500,000 of active business income for small business. The small business tax rate was dropped from 2% to 1% at the start of 2022 and stands as the lowest rate on initial small business income in Atlantic Canada.
A few other highlights
• Bring on the tourists — The Island is adding $750,000 to its tourism marketing budget to roll out a campaign aimed at grabbing as many of the post-lockdowns (knock on wood) vacationers as possible.
• Clean tech grants — The provincial government is offering $1 million in new grants for companies in the clean tech sector. The grants in the budget come as a footnote to February’s announcement of a new $25-million Clean Tech Park in Georgetown, being a 60-acre business park plus a new Clean Tech Academy (with joint offerings from Holland College and the University of P.E.I.) and 44,000-square-foot Clean Tech Learning and Innovation Centre.
• Bicycle! Bicycle! — In the mix of one-off incentives throughout the region to back governments’ health and environment goals, the Island’s $100 rebate on new bicycles flies off the page. Maybe the real question is whether or not it’s better to offer people $100 back on a bicycle (age immaterial) or offer parents a $500 rebate on children’s sports and arts programming, as included in Nova Scotia’s budget.
Newfoundland and Labrador
Presented on April 7, the same day as the federal budget, Finance Minister Siobhan Coady said Newfoundland and Labrador projects a deficit of $351 million in 2022-23. While not the highest deficit projected among the Atlantic provinces in raw dollars, being less than Nova Scotia’s expected deficit, the amount is harder to carry given the province’s population and economic profile. On the upside, the net debt-to-GDP ratio fared a lot better than expected this time last year and is now the lowest registered since 2015-16, helped along on the GDP side.
The bigger issue for Newfoundland and Labrador is a planned return to budget surplus by 2026-27, as proposed, will require controlling and even reducing spending in some areas in a province that still needs to do the core work in establishing a modern municipal and regional governance system, get a new education system running (given reduction in school boards) and a new healthcare system (after announcing a reduction in health boards and waiting on the final report from a sweeping review: Health Accord NL) all with the added layer of a rapidly aging population at a rate beyond the rest of the region. There is also greater reliance on natural resources, giving the province an oil and minerals bump but also featuring companies looking to governments to help mitigate the pains of the energy transition.
Provincial corporate income tax rates held at 15%, and 3% on the first $500,000 of active business income for small business.
A few other highlights
• Manufacturing and processing — A sweeping, 10% credit proposed for companies spending on equipment for the manufacturing sector, also reaching into the fishery, agriculture and forestry. The province also has introduced a 20% green technology tax credit.
• Film and video production — Newfoundland and Labrador has introduced a tax credit covering 30% of total qualified production costs for television and film projects up to a maximum of $10 million per project in the year. Called the All Spend Film and Video Production Tax Credit, its introduction is paired with a $10-million spend on a new Centre for Television and Film at the College of the North Atlantic in St. John’s and another $10 million available as direct support for productions in the province, dispersed to eligible producers through the N.L. Film Development Corporation.
• One-year reprieve — The provincial government announced retail sales tax on home insurance will be eliminated as of budget day for a year and registration fees for cars, light duty trucks and taxis will also be halved for a year. While pitched as a good news headline, the announcement on insurance caught the Insurance Bureau of Canada off guard. “IBC supports any effort to save consumers money in these tough times, and we are especially in support of removing the retail sales tax. However, the decision to remove the retail sales tax effective immediately is the most costly way to do this,” said IBC vice-president Atlantic Amanda Dean, in a statement. Homeowners were asked to be patient in the wake of the “abrupt decision,” to allow insurance companies to process refunds.
Federal Finance Minister Chrystia Freeland brought down Canada’s budget for 2022-23 on April 7 with no changes to personal tax rates. That said, the feds are looking at ways to get the highest income earners to pay more federal tax and limit the use of deductions. Among other things, proposed changes to the Alternative Minimum Tax will be coming in the fall economic update.
As with many provincial budgets, housing was a focus area for the Government of Canada. Foreign ownership of non-recreational, residential property is on hold for a couple of years, with some exemptions. And on the flip side, for would-be new homeowners, the country is also introducing a Tax Free First Home Savings Account (FHSA) where withdrawals for a first home purchase would not be taxed. The accounts carrying up to $40,000 will be an option for Canadians 18 and older starting in 2023. An account holder who has not bought a property after 15 years will have the option to transfer funds into an RRSP. Of course taxes would come into play if withdrawing then from an RRSP.
Of interest to contractors, a new, multi-generational home tax credit will allow families to claim 15% of up to $50,000 in eligible renos, creating a secondary living space for seniors or disabled persons. It comes atop an increased ceiling on the home accessibility tax credit, introduced in 2015 for renovations to support independent living for persons with disabilities. However, flipping houses is now being discouraged by fully taxing profit on homes bought and sold in less than a year, with some exemptions to avoid hamstringing people going through sudden life changes.
For the skilled trades workforce and employers in Atlantic Canada trying to draw in skilled trades workers, a tax deduction of up to $4,000 a year for travel and temporary expenses was of note. And for small businesses, while it wasn’t ready yet, a re-commitment to finding a way to lowering credit card fees while protecting consumer rewards was also notable.
The federal government also opted to up the line on what a business can have in taxable capital and still qualify for the small business tax deduction on the first $500,000 of active business income.
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