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2014-2015 Nova Scotia budget highlights

Canadian tax alert

April 4, 2014

Read a summary of the Nova Scotia budget highlights from Deloitte's tax professionals

Yesterday, Finance Minister Diana Whalen presented Nova Scotia’s 2014-2015 budget. The budget projects $9.6 billion in revenues, $9.9 billion in expenses, and a bottom line deficit of $279 million.

This budget anticipates revenue to increase by $345 million, while expenses increase by $110.

The budget also provided an update on the expected final numbers for the 2013-2014 fiscal year. In summary, while the original budget for 2013-2014 projected a surplus of $16.4 million, the final forecast result for 2013-2014 is actually a deficit of $562 million.

Additional projected deficits of $166 million in 2015-2016 and $121.4 million in 2016-2017 are also anticipated, before a return to a projected surplus of $13.6 million in 2017-2018.

The budget increases spending primarily in in the areas of health (up approximately 5%) and education (up approximately 10%), while either reducing or maintaining current spending levels in most other departments.

On the revenue side, the budget projects significantly increased personal income tax revenue (up approximately 7%), as well as increased harmonized sales tax (HST) revenue (up approximately 2.5%). Federal government transfers are expected to remain approximately equal overall, with an increase in both equalization and health transfer amounts essentially offset by a decline in offshore accord payments due to declining resource royalties, along with additional funding reductions attributed largely to the timing of various cost sharing agreements on infrastructure-related projects.

Fiscal and economic outlook

  • Nova Scotia’s real GDP growth is projected to be 1.4% in 2014, and 2.1% in 2015. This compares to projected real GDP growth for Canada of 2.3% and 2.6% in 2014 and 2015 respectively, and projected real GDP growth for the United States of 2.8% and 3.1% in these same years.
  • Nova Scotia’s total net debt has increased in the past fiscal year from $14 billion to $14.6 billion. The province’s total net debt is projected to continue increasing in each year in the forecast period, and will reach $15.7 billion by 2017-2018.
  • Nova Scotia’s projected net debt to GDP ratio has increased in the past fiscal year from 35.8% to 37.5%. After remaining stable in 2014-2015, the projected net debt to GDP ratio is forecast to decline over time, dropping to 34.2% by 2017-2018.
  • The budget anticipates that the province’s total population will continue to stagnate, with a decline expected by 2015 of approximately two thousand people from the 2013 population base of 941,000.
  • The budget is also projecting a decline in the province’s 2013 actual unemployment rate of 9%, to 8.6% in 2014, and 8.4% in 2015. This represents an increase of 4,000 jobs.

Corporate tax measures

  • The budget maintained the previously announced reduction to the corporate income tax rate for small businesses, which was included in last year’s budget. This decrease in rate is from 3.5% to 3.0%, and was effective January 1, 2014. However, the small business deduction limit threshold has also been decreased, from $400,000 to $350,000.  As a result, the provincial small business deduction limit threshold is now the lowest in the country. The federal small business deduction limit continues to be $500,000, and almost all other provinces have chosen to match the federal limit.
  • No reductions in the general corporate tax rate were announced. Nova Scotia’s general corporate tax remains at 16%,which is tied with Prince Edward Island as the highest in the country.

Personal tax measures

  • No reductions in personal income tax rates were announced in this budget. As a result, Nova Scotia’s highest marginal tax rate of 50% remains essentially tied with Quebec as the highest in the country.
  • Effective January 1, 2014, the province’s Graduate Retention Rebate has been eliminated. 2013 will therefore be the final year that this amount can be claimed by qualifying graduates as a tax credit on their personal income tax returns.

HST

  • The HST rate for the province has been maintained at 15%, as previously indicated by the current government. The HST rate reductions (i.e., 1% in 2014, and an additional 1% in 2015) that had been announced in last year’s budget by the previous government have been cancelled.

Other measures

  • The government is presently in the process of a comprehensive review of taxes, fees, and regulations. The stated goal of the review is to determine how Nova Scotia’s taxes, fees, and regulations can better support growth in the private sector based upon the principles of fairness, sustainability, simplicity and competitiveness. The results of this review will be delivered to the government in the fall of 2014.
  • As previously promised, the government has committed to removing the energy efficiency fee from all electricity bills, effective January 1, 2015.

For further details, we refer you to the Ministry of Finance website.

Contacts

Canadian Managing Partner, Tax
Heather Evans
416-601-6472

National Tax Policy Leader
Albert Baker
416-643-8753 

Tax Director of Operations, Atlantic Region
Brian Brophy
709-758-5234

Jim MacGowan
902-721-5697

Dave Cameron
902-721-5636

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