March 22, 1999
(Finance)

Government further eases tax burden for businesses

Finance Minister Paul Dicks announced in his 1999 Budget Speech today a further increase in the exemption threshold of the Health and Post Secondary Education Tax (HAPSET), commonly known as the payroll tax, a tax reduction of $1.5 million.

In the 1998 Budget, government increased the exemption threshold for annual business payroll tax from $100,000 to $120,000. Today, the minister announced that effective January 1, 1999, the exemption threshold will increase by a further $30,000 to $150,000. In other words, all businesses which currently pay the tax will benefit, and businesses with an annual payroll of $150,000 or less will not have to pay any Health and Post Secondary Education Tax.

"The business community has continually expressed its concern about the payroll tax," said Minister Dicks. "Government has responded by increasing the threshold for a second consecutive year, allowing an additional 300 employers to become exempt from the payroll tax. This is consistent with government's commitment to decrease taxes when fiscally responsible to do so."

Together, the last two payroll tax measures will make $12.5 million available to businesses for employment and investment over the next five years, and has resulted in 525 employers being removed from the payroll tax roll.

Media contact: Paula Dyke, Communications, (709) 729-0329.

BACKGROUNDER
HEALTH AND POST-SECONDARY EDUCATION (PAYROLL)
TAX INCREASE EXEMPTION THRESHOLD
GENERAL OVERVIEW

• Government has made a commitment to the business community to lessen the impact of the tax as the province's fiscal position improves and it is prudent to do so.

DETAILS

• Effective January 1, 1999, the exemption threshold for the payroll tax will increase from $120,000 to $150,000.

• As result, 300 employers will be removed from the tax roll, including 286 in the non-renewable source sector and 14 in the renewable resource sector.

  The number of employers paying tax will decrease from 2,391 to 2,091 as a result of this measure.

  The revenue impact of increasing the exemption threshold by $30,000 will be $1.5 million.

  In the 1998-99 Budget, the exemption threshold was increased from $100,000 to $120,000, effective January 1, 1998. This resulted in 225 employers being removed from the tax roll and a tax savings of $1 million for all businesses.

  As a result of these last two payroll tax measures, 525 employers have been removed from the tax roll and all businesses will share in a tax savings of $12.5 million over the next five years.

1999 03 22