Finance
October 23, 2006

The Honourable Loyola Sullivan, Minister of Finance and President of Treasury Board, announced today that government will implement a new dividend tax credit rate in response to federal government changes to taxes on dividend income, for investors who receive dividend income from large corporations.

"Without a change at the provincial level, the provincial tax on these dividends would increase," said Minister Sullivan. "It is not government�s intent to increase taxes and with this tax change, we are protecting people from unintended tax increases on investment income."

In Canada, corporate income is subject to federal and provincial corporate income taxes. On distribution of dividends to individuals, this corporate income is also subject to federal and provincial personal income taxes.

The Federal Government announced a change to the dividend tax credit for large corporations, but left the credit for small businesses unchanged.

In response, Newfoundland and Labrador�s dividend tax credit rates for small business will remain at five per cent but the credit for large corporations will be increased from five per cent to 6.65 per cent to ensure the Provincial Government does not gain revenue at the expense of investors. The Income Tax Act will also be amended to reflect the changes.

"We do not want to increase taxes. In fact, we want to put more money back into the hands of the people who earned it," said the minister. "We have undertaken a tax review to determine our priorities for tax reductions and will report the results of that review in Budget 2007."

Media contact:

Deborah Pennell
Director of Communications
Department of Finance
709-729-6830, 685-6612
DeborahPennell@gov.nl.ca