March 26, 2009
Low-Income Earners and Small Business Among Beneficiaries
The Williams Government will continue in Budget 2009 to build on recent historic tax cuts by supporting low-income earners and continuing to make Newfoundland and Labradorís tax regime competitive for small business to prosper. The Honourable Jerome Kennedy, Minister of Finance and President of Treasury Board, today announced that the Provincial Government will invest $11.5 million this year to introduce new tax reductions that will put more money back in peopleís pockets and help support the provincial economy. These measures bring the cumulative tax relief implemented over three years, beginning with 2007-08, to approximately $776 million.
Low-Income Tax Reduction Program
"Our government recognizes the barriers that some individuals and families face in achieving their full potential," said Minister Kennedy. "In order to assist individuals who are earning minimum wage and are striving to improve their financial situation, we are increasing the income threshold under the Low-Income Tax Reduction program which will result in an additional 22,450 individuals receiving a reduction in their provincial income tax."
Effective for the 2009 taxation year, the Low-Income Tax Reduction program will be enhanced. The income threshold will be increased from $13,511 to $15,911 for individuals and from $21,825 to $26,625 for families, resulting in a number of individuals and families paying a reduced amount of provincial tax, and individuals with income less than the new threshold levels paying no provincial income tax.
"This measure is taken to ensure that individuals in receipt of low income receive the greatest benefit from announced increases in the minimum wage," said Minister Kennedy. "For the 2009 taxation year, approximately 47,000 individuals will receive benefits under the Low-Income Tax Reduction program. An individual with an income of $16,000 will save $544 annually, while a family with an annual income of $26,000 will save almost $800 annually."
Dividend Tax Credit
Effective for the 2009 taxation year, the Dividend Tax Credit rate on eligible dividends will be increased from 6.65 per cent to 9.75 per cent in order to bring these dividends more in line with other provinces. This will result in a tax savings of $1.3 million.
Supporting and Attracting Business
"It is important that Newfoundland and Labrador remains competitive and is able to attract new business and investment that stimulates the economy," said Minister Kennedy. "This includes supporting our own small businesses and maintaining our competitive tax regime. Significant progress has been made in recent years to provide greater tax competitiveness, including an enhanced payroll tax exemption, elimination of the sales tax on insurance premiums and reduction of personal income tax rates. Newfoundland and Labrador currently boasts the lowest personal income tax rates in Atlantic Canada and is among the lowest in the country."
In keeping with its 2007 Blueprint commitment to annually review its business tax environment to ensure Newfoundland and Labrador remains competitive, the Provincial Government will increase the small business threshold for corporate income tax; enhance the Labour-Sponsored Venture Capital Tax Credit; and, provide a gasoline tax exemption for off-road equipment used for onshore oil exploration.
Corporate Income Tax
While the general corporate income tax rate is 14 per cent, the small business tax rate is five per cent on the first $400,000 of income. Effective January 1, 2009, the corporate income tax small business threshold will increase from $400,000 to $500,000. Approximately 4,400 companies will benefit from this measure, at a total cost of $200,000.
Labour-Sponsored Venture Capital Tax Credit
Effective April 1, 2009, the province will enhance the Labour-Sponsored Venture Capital Tax Credit program by increasing the provincial tax credit rate for individuals who invest in a labour-sponsored venture capital corporation (LSVCC) fund from 15 per cent to 20 per cent. In addition, the maximum annual contribution per year will be increased from $5,000 to $10,000. The venture capital fund registered under the program is GrowthWorks Atlantic Venture Fund, which was certified in January 2005.
In December 2004, the province passed the Labour-Sponsored Venture Capital Tax Credit Act. The legislation provides for the issuance of a 15 per cent provincial tax credit for an individual who invests in a LSVCC fund registered under the act. Individual investors of a LSVCC fund will also be eligible for a matching 15 per cent federal income tax credit. The LSVCC fund is required to invest in emerging Newfoundland and Labrador growth companies with less than $50 million in assets and 500 employees and at least 75 per cent of salaries and wages paid to residents in the province. A minimum of 75 per cent of the funds raised in Newfoundland and Labrador have to be reinvested in this province within three years after the year in which the capital is raised.
Onshore Oil Exploration Exemption
Consistent with its commitment to take maximum advantage of all opportunities to develop the provinceís energy sector, including onshore exploration, effective April 1, 2009, the Provincial Government will provide a tax exemption on gasoline consumed by off-road equipment used for onshore oil exploration. The measure complements the current tax exemption for gasoline used on an exploration site in equipment used for the exploration of minerals.
Commercial Electrical Permit Fees
Budget 2009 provides for changes to the commercial electrical permit fees. Effective April 1, 2009, commercial electrical permit fees will be reduced for projects valued less than $2,000. For work valued at up to $500, the fee will be reduced from $200 to $50; and, for work valued between $500 to $2,000, the fee will be reduced from $200 to 10 per cent of the value of the work. There is no change to the fee for projects valued over $2,000. Changes do not apply to the fees charged for residential electrical permits. For further information about changes to commercial electrical permit fees, please call 709-729-4875.
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Effective for the 2009 taxation year, the Low-Income Tax Reduction income threshold will be increased from $13,511 to $15,911 for individuals and from $21,825 to $26,625 for families. Consequently, the credit will eliminate provincial income tax for individuals with net income up to $15,911 and for families with net income up to $26,625, or approximately 31,550 people. Partial tax reductions will be received by individuals with net income up to $19,399 and for families with net income up to $31,863, or approximately 15,400 people.
The Low-Income Tax Reduction program was first introduced by the Williams Government effective for the 2005 tax year. The enhancement increases the cost of the Low-Income Tax Reduction from $6 million to $16 million per year. The following tables demonstrate the Low-Income Tax Reduction savings for individuals and families.
For more information about the Low-Income Tax Reduction Program, please contact:
Department of Finance
2009 03 26 2:10 p.m.
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