On May 31, 2021, the Honourable Siobhan Coady, Deputy Premier, Minister of Finance, and President of the Treasury Board, presented the Newfoundland and Labrador budget for 2021–22. Projecting a deficit of $826 million, this year’s budget seeks to reign in government spending and chart a course towards more fiscal stability, with a return to balance in five years.
The budget includes approximately $100 million for COVID-19-related healthcare measures, as well as $30 million for a program to help the province’s tourism and hospitality sector recover from the pandemic. Significant investments are also planned for infrastructure projects, education, social housing, initiatives to support economic development, and improvements to internet connectivity.
No corporate income tax changes were announced. However, the budget contains a series of personal income tax increases beginning in 2022 for individuals earning $135,974 or more, along with the introduction of a refundable physical activity tax credit for up to $2,000 per family. In addition, the province announced a couple of interesting commodity tax proposals aimed at improving the health of its residents.
Sugar-Sweetened Beverage Tax
The province has proposed the introduction of a sugar-sweetened beverage tax that will take effect on April 1, 2022. Under the proposal, sugary drinks, such as soft drinks and many other carbonated beverages, will be taxed at a rate of 20 cents per litre. Further details on this new tax are expected to be released later in the year.
Tobacco Tax Increase
The provincial tax on tobacco products will increase, effective June 1, 2021, by an additional 3 cents per cigarette and 6 cents per gram of fine-cut tobacco. A corresponding increase will be made to the tobacco tax rebate for Labrador Border Zones, with the rebate available in these zones increasing by an additional 3 cents per cigarette and 6 cents per gram of fine-cut tobacco. The rebate for the Labrador Border Zones is designed to decrease cross-border shopping and allow businesses in those areas to remain competitive with their Québec counterparts by aligning the provincial tobacco tax rates with those of its neighbour.
Further information on the 2021 Newfoundland and Labrador budget may be found on the province’s website at: https://www.gov.nl.ca/budget/2021/
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to call the Ryan TaxDirect® line at 1.800.667.1600.