Finance
June 6, 2007

Unprecedented Tax Cuts Reflected in New Legislation

The amendments to the Income Tax Act required to enact the largest personal income tax reductions in the history of the province, have passed in the House of Assembly.

The Honourable Tom Marshall, Minister of Finance and President of Treasury Board, said these long-awaited tax measures contained in Budget 2007 will put hard-earned money back into the pockets of ordinary Newfoundlanders and Labradorians. Furthermore, it will increase the province�s overall competitiveness and ultimately assist in building a stronger more diversified economy as the province moves toward being more self-reliant.

"For far too long the people of this province have been forced to carry a heavy tax burden. Paying the highest personal income tax in the country has inhibited our economic growth and has impeded our ability to produce high paying jobs," said Minister Marshall. "The Budget 2007 tax measures will stimulate economic growth by letting the people decide how they want to spend their money. We have taken our tax rates from being the highest in the Atlantic Canada to the lowest, making the province far more attractive to people and companies looking to establish in the Atlantic region."

The sweeping changes to the provincial personal income tax system announced in Budget 2007 will cost the province approximately $160 million once fully implemented. Effective July 1, 2007, the Provincial Government will be reducing the statutory tax rates as follows: from 10.57per cent to 8.7 per cent for the first bracket; from 16.16 per cent to 13.8 per cent for the second bracket; and, from 18.02 per cent to 16.5 per cent for third bracket. In addition, to protect taxpayers from the effects of inflation, tax brackets, most non-refundable tax credits and certain benefits, such as the Low Income Senior�s Benefit and Low Income Tax Reduction benefit, will be indexed annually, commencing July 1, 2007.

"We have implemented a balanced package of tax reductions, with at least 16 per cent savings in provincial income tax," said Minister Marshall. "For people with taxable income up to $35,000, the savings can be as much as 20 per cent. Individuals with taxable income up to $13,000 will pay no provincial personal income tax, while families with taxable income of up to $21,000 will also be relieved of provincial income tax."

The Low Income Tax Reduction was first implemented by the Williams Government in 2005. Under this initiative, a single person with taxable income less than $12,000 and a family with taxable income less than $19,000 were not required to pay provincial personal income tax. Effective January 1, 2007, the threshold for individuals has been adjusted to $13,000 and for families, including single-parent families, the income threshold has been adjusted to $21,000. Partial tax reductions will be received by individuals with net income up to $15,900 and for families with net income up to $24,706. These amounts will be indexed in 2008. In 2008, approximately 31,100 individuals will receive the Low Income Tax Reduction compared to 25,900 under the old system, an increase of 5,200 beneficiaries of which 4,000 will no longer pay any provincial income tax.

The Seniors� Benefit for married seniors has also been enhanced by adjusting the qualifying income threshold. In 2006, a senior couple received the full Seniors� Benefit if the couple�s combined income was less than $15,032, and received a partial benefit with combined income up to $21,482. For the 2007 year, the income thresholds have been adjusted so that the full benefit is received for incomes up to $25,000 and the partial benefit is received for incomes up to $31,587.

About 3,800 senior couples will receive a Seniors� Benefit cheque for $768 in October this year. Another 3,200 will receive a cheque for a partial benefit. This will increase the total cost of the Seniors� Benefit to $12.2 million, an increase of more than $4 million over last year. As a result, in 2008, approximately 7,000 senior couples will receive the Seniors� Benefit compared to 1,100, an increase of 5,900 couples.

Additionally, in this sitting of the legislature, the Williams Government amended the Retail Sales Act, reducing the tax rate applicable to the private sale of used vehicles from 15 per cent to 14 per cent, consistent with the tax rate imposed on vehicles sold through dealerships. This was another initiative announced in Budget 2007.

Minister Marshall noted the Provincial Government has also adjusted the small business corporate income tax threshold from $300,000 to $400,000.

"Never before in our history have we had the ability to address our high personal tax levels in a meaningful way," said Minister Marshall. "It has been made possible by the strong fiscal management practices of our government, enhanced resource revenues and the offset payments under the 2005 Atlantic Accord agreement negotiated by Premier Danny Williams."

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Media contact:
Melony O�Neill
Communications Branch
Executive Council
709-729-0557
MOneil@gov.nl.ca

2007 06 06                                                  1:15 p.m.

 


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