On June 17, 2020, Minister of Finance and Chair of Treasury Board, Darlene Compton, presented the 2020 Prince Edward Island budget, revealing a deficit of $172.7 million. The minister noted the deficit is a result of the economic shock created by the COVID-19 pandemic as well as the increased expenditures required to recover from it. This year’s budget includes spending increases for health care, education, charities, housing, agriculture, environment, and support for the vulnerable.
The minister proposed income tax incentives for small businesses, individuals, and families that will take place in 2021 and two interesting commodity tax measures as noted below.
Small Business Income Tax
This year’s budget proposes to lower the small business income tax rate by 1%, to an overall rate of 2%, beginning on January 1, 2021. Once these tax rate reductions are implemented, Prince Edward Island will have the lowest small business income tax rate in Atlantic Canada.
Personal Income Tax
An increase to the basic personal income tax amount equal to $500 to bring it up to $10,500, commencing on January 1, 2021, was proposed in this year’s budget. In addition, the province is proposing to raise the low-income threshold from $18,000 to $19,000, effective the same date. The province has also introduced a non-refundable children’s wellness tax credit of $500 that is designed to help families pay for activities related to the well-being of those under the age of 18.
The budget announced an increase in tobacco taxes from 21.5 cents to 27.52 cents on products other than cigarettes, cigars, and tobacco sticks. The tax on cigars will increase by 3.4% to 75%. These changes will take effect the day after the implementing bill receives Royal Assent.
Marked Fuel Program
Under the Marked Fuel Program, persons involved in specified operations, including agriculture are eligible for a gasoline tax exemption. This year’s budget proposes that the Marked Fuel Program will be extended to apply to all farm-plated vehicles.
Additional information on the 2020 Prince Edward Island budget is available on the province’s website at:
Prince Edward Island Budget 2020