Executive Council
Finance
May 25, 2016

Working Together to Create Strong Partnerships

Federal Funding Relief Brings Changes to Temporary Deficit Reduction Levy

Today the Federal Government, along with the Provincial Government, announced significant funding relief for Newfoundland and Labrador. The Federal Government has deferred the province's payments under the Equalization Repayable Floor Loan. As a result of this relief, the Provincial Government will be making changes to the Temporary Deficit Reduction Levy.

"Our strong relationship with the federal government has resulted in funding relief on our equalization repayments which is enabling us to make positive changes to the Temporary Deficit Reduction Levy. We are now able to increase the number of people that will not have to pay. Under the original program close to 38 per cent of tax filers did not pay - now with these changes close to 74 per cent of tax filers will not pay, or 3 in 4 tax filers in the province. This will reduce the impact in particular on our lower income earners, who are most vulnerable."
- The Honourable Dwight Ball, Premier of Newfoundland and Labrador

Effective June 1, 2016, the monthly repayments currently being paid to the Federal Government will be suspended. Newfoundland and Labrador's monthly repayments will resume in April 2022. Newfoundland and Labrador became an equalization recipient in 1957-58. Newfoundland and Labrador stopped receiving equalization, after 51 years, in 2007-08. Under the 2005 Equalization Repayable Floor Loan, the province owed $378 million to the federal government due to overpayments. While on equalization, Newfoundland and Labrador repaid $107 million of that loan. Beginning in April 2016, the province repaid a further $4.5 million. Those payments are now suspended until April 2022.

"We are committed to working with all levels of government, and with Canadians, not only to address our economic and fiscal challenges now, but to ensure long-term economic growth that benefits everyone. This announcement today is an example of how our government is committed to improving the quality of life for people in Newfoundland and Labrador because it will contribute to the long-term economic prosperity of the province."
- The Honourable Judy Foote, Minister of Public Services and Procurement

With the suspension of the payments under the Equalization Repayable Floor Loan, the Provincial Government is able to make changes to the Temporary Deficit Reduction Levy. The Provincial Government is increasing the threshold to $50,000, meaning the number of people that will not have to pay the Temporary Deficit Reduction Levy will increase - now approximately 74 per cent of tax filers will pay no levy. Further, the amount of the levy being paid by those with a taxable income of more than $50,000 will change, making the distribution more progressive.

For example, a person with a taxable income of $55,000 will pay $100 in the annual levy. While someone with a taxable income of $100,000 will pay $700. And someone with a taxable income of $625,000 or more will pay a levy of $1,800.

"Our government is listening to the people of Newfoundland and Labrador. We recognize the impacts that our budget has on people in the province and through our strong relationship with our federal counterparts we are helping lessen those impacts on the most vulnerable in our province. We have been working with the Federal Government and we have been able to realize new money that was not in the budget. Because of this additional cash we have been able to make this change to the Temporary Deficit Reduction Levy. This announcement today is encouragement that the Federal Government recognizes that our government has a solid plan to deal with the fiscal challenges facing the province."
- The Honourable Cathy Bennett, Minister of Finance and President of Treasury Board

Payments for the outstanding $267 million under the Equalization Repayable Floor Loan will be recovered in equal monthly interest-free amounts over a 10-year period, from April 1, 2022 to March 31, 2032.

QUICK FACTS

  • The Federal Government has deferred the province's payments under the Equalization Repayable Floor Loan.
  • Effective June 1, 2016, the monthly repayments currently being paid to the Federal Government will be suspended. Newfoundland and Labrador's monthly repayments will resume in April 2022.
  • Payments for the outstanding $267 million under the Equalization Repayable Floor Loan will be recovered in equal monthly interest-free amounts over a 10-year period, from April 1, 2022 to March 31, 2032.
  • With the suspension of the payments under the Equalization Repayable Floor Loan, the Provincial Government is able to make changes to the Temporary Deficit Reduction Levy.
  • The Provincial Government is increasing the threshold to $50,000, meaning the number of people that will not have to pay the Temporary Deficit Reduction Levy will increase. Further, the amount of the levy being paid by those with a taxable income of more than $50,000 will change, making the distribution more progressive.

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Media contacts:

Nancy O'Connor
Director of Communications
Office of the Premier
709-689-1825
nancyoconnor@gov.nl.ca 		Annie Trépanier
Office of the Honourable Judy M. Foote
819-997-5421
Annie.Trepanier@tpsgc-pwgsc.gc.ca
Jennifer Tulk
Director of Communications
Department of Finance
709-729-6830, 728-4104
jennifertulk@gov.nl.ca

2016 05 25                              11:30 a.m.