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March 22, 2000
(Finance)

 

2000 Payroll Tax changes

Finance Minister Lloyd Matthews announced today in his 2000 Budget Speech that effective April 1, 2000, the exemption threshold of the Health and Post Secondary Education Tax (HAPSET), commonly know as the payroll tax, will increase on an annual basis to $400,000. This means an annual tax savings to businesses in Newfoundland and Labrador of $6.3 million.

From 1997 to 1999 government increased the exemption threshold from annual business payroll tax from $100,000 to $150,000. Today, the minister announced that effective April 1, 2000, the exemption threshold will increase by a further $250,000. In other words, all businesses which currently pay tax will benefit, and businesses with an annual payroll of $400,000 or less will not have to pay any payroll tax at all.

"This move will reduce the number of businesses currently paying Health and Post Secondary Education Tax by a further 1,300, bringing the total number of businesses which have benefited to date to1,825," noted Minister Matthews. "This move is in keeping with government�s commitment to reduce taxes as it is fiscally responsible to do so, as well as reflecting many of the presentations made during the Jobs and Growth Consultations, the Tax Review Consultations and the Pre-Budget Consultations."

Effective April 1, 2000, government will also equalize the payroll tax rate for the renewable resource sector from one to two per cent on an annual basis, in line with the general rate.

The Advisory Council on the Economy and Technology (ACET) recommended both of these measures in its November 1999 report. The result of both payroll tax measures will be annual savings to businesses of $4.1 million.

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

BACKGROUNDER

Health and post-secondary education (payroll) tax
increase in exemption threshold and rate equalization

General Overview

  • The 2000 budget announces an increase in the exemption threshold to $400,000 and the equalization of the tax rate for the renewable resource sector with that of the general rate paid by other employers.

  •  These measures reflect one of the recommendations from the Premier�s Advisory Council on the Economy and Technology�s report on the provincial tax regime, released in late 1999, and a message that was heard again during the consultations on Jobs and Growth.

  •  The net impact of these two measures will be a revenue reduction of $4.1 million annually. This revenue will be put back into the hands of employers.

Details

  • Beginning April 1, 2000, the annual exemption threshold will be increased from $150,000 to $400,000. As the tax is an annual tax paid monthly, the effective tax exemption threshold for the year is calculated as 9/12ths of the increased amount of $250,000 plus the total of the previous tax free threshold of $150,000.

  • Beginning April 1, 2000, the rate of tax applicable to the renewable resource sector will increase from one per cent to the general rate of two per cent. Renewable resource sector means the fishing, forestry and agriculture industries

  • For the 2000 calendar year, the effective rate of tax for those employers engaged in the renewable resource sector will be 1.75 per cent. The effective tax rate is calculated by adding 9/12ths of the increase in rate to the existing rate.

  • On January 1, 2001, the annual tax free remuneration will be $400,000, and the annual tax rate for all employers will be two per cent.

  • Some employers may be required to adjust previous remittances in order to reflect the new threshold and rate change.

2000 03 22 


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