Minister of Finance, Energy and Municipal Affairs and Treasury Board Chair, Wesley J. Sheridan, tabled the 2012 Prince Edward Island Budget on April 18, 2012. The budget focused on achieving a greater degree of economic security for residents and an assurance to future generations that their legacy has been protected. The budget discusses investing in the private sector, and optimizing expenditures in the education and health care sectors, with the aim of restoring fiscal balance by 2015.
Prince Edward Island’s three year plan includes a significant commodity tax change, with the announcement that the province intends to harmonize its provincial sales tax with the GST, effective April 1, 2013.
Commodity Tax Measures
The Introduction of HST
The province announced that it intends to enter into negotiations with the federal government to harmonize its provincial sales tax with the GST, effective April 1, 2013. The province noted that, with the exception of Prince Edward Island, all provinces east of Manitoba have harmonized their provincial sales tax, and given the proven experience in other jurisdictions, the province believes that harmonization will help the private sector achieve the goal of 75,000 jobs by 2016.
Under a harmonized sales tax regime, the HST rate is proposed to be 14%, compared to the 15.5% effective sales tax rate currently applicable in the province. This will be achieved by setting the provincial component of the HST at 9%, representing a 1% reduction to the sales tax rate currently in the province (and a 1.5% reduction to the effective sales tax rate, since the 10% provincial sales tax is applied to the GST-included cost of taxable goods and services). Businesses registered for GST would automatically be registered for the HST.
As a result of harmonization, the province will ensure the following:
- Home heating oil will not be taxed;
- Children’s clothing and footwear will not be taxed; and
- An enhanced refundable tax credit will be created to provide tax relief to low and modest income residents.
The province will, in conjunction with input from the private sector and the public, develop a detailed plan to ensure a smooth implementation to the HST. This will include adjustments to the provincial and excise taxes, as well as transition rules for transactions that straddle the implementation date. The legislative changes are expected to be introduced in the fall of this year.
Environmental Tax for Tires
Effective midnight on April 19, 2012, the environmental tax for tires with a rim size greater than 17 inches will be increased to $11.25 per tire to better reflect the actual costs of disposal.
Further information on the Prince Edward Island budget is available on the province’s web site at:
Prince Edward Island Budget 2012.