On April 6, 2021, Donna Harpauer, Deputy Premier and Minister of Finance, tabled the 2021–22 Saskatchewan budget. The province has responded to the health and financial crisis created by the COVID-19 pandemic with significant spending on healthcare, education, social services, and key infrastructure projects. Indeed, with a projected deficit of $2.6 billion and no plans to return to balance until 2026–27, this year’s budget includes a record $6.5 billion for healthcare and $1.5 billion for additional pandemic support.
Forecasting a 3.4% increase in real gross domestic product, the budget includes various measures designed to promote economic recovery and future growth, as well as improve tax fairness. “We don’t anticipate tax hikes going forward,” noted the Deputy Premier. However, several significant tax changes and funding initiatives were announced as part of this year’s budget, as discussed below.
Commodity Tax Measures
Vapour Products Tax
To make vapour products less attractive to youth and non-smokers, the province is proposing to introduce a Vapour Products Tax (VPT), which will be imposed on all vapour liquids, products, and devices, effective September 1, 2021. As of the same date, to prevent double taxation, vapour products will become exempt from Provincial Sales Tax (PST). The VPT will be levied at a rate of 20% of the retail price of taxable products. Vendors of vapour products will be required to become licensed by August 31, 2021.
Tobacco Tax
The province announced that it will add “heat-not-burn” (HNB) tobacco products to its Tobacco Tax regime. Effective June 1, 2021, under a new category of products, Tobacco Tax will apply at a rate of 20.5 cents per HNB tobacco unit, which represents approximately 75% of the existing tax rate for tobacco cigarettes at 27 cents per stick.
Tax on Electric Vehicles
The budget includes a proposal to introduce a new annual tax of $150 for each electric passenger vehicle registered in Saskatchewan, effective October 1, 2021. The Saskatchewan Government Insurance Program will administer the tax, and revenue received will be included in calculations made under The Fuel Tax Accountability Act. While counterintuitive to reducing overall vehicle emissions, the new tax is intended to ensure that owners of electric passenger vehicles share in the cost of provincial highway maintenance, which is typically funded through the Fuel Tax paid on traditional fuels for non-electric vehicles. The province also noted that it will consider expanding the tax to commercial and interjurisdictional electric vehicles, as well as applying the tax at vehicle charging stations, in the future.
Provincial Sales Tax on E-Commerce
The province has confirmed that legislation will be re-introduced to implement the changes announced in last year’s budget requiring non-resident e-commerce platforms to collect and remit PST on taxable supplies made in Saskatchewan.
Property Tax Measures
The provincial property tax percentage rate was adjusted by the province in advance of the budget, lowering commercial, industrial, elevator, railway, resource, and pipeline properties to 85% of taxable assessed value. The budget confirmed this change and noted that Education Property Tax mill rates will be increased slightly to keep in line with inflation. On average, a homeowner in Saskatchewan can expect to pay an additional $18 per year.
Corporate Income Tax Measures
Small Business Tax Rate
The province announced that the small business corporate income tax rate, which was temporarily eliminated (i.e., reduced to 0%) on October 1, 2020, will return to 1% on July 1, 2022, and then to 2% the following year. The eligible revenue threshold will remain at $600,000.
Saskatchewan Technology Start-Up Program
The Saskatchewan Technology Start-Up Incentive (STSI) will be extended for another five years until 2025–26. This non-refundable, 45% income tax credit for investments in eligible start-up businesses that develop new or advance existing technologies, or create new scalable products, services, or processes, was originally set to expire in the current year. In addition, the amount that a start-up business can raise under the program will be raised from $1 to $2 million, and the carry-forward period for unused tax credits will be extended from four to seven years.
Government Grants
This year’s budget includes numerous investments to support the province through the remainder of the pandemic and into a state of economic recovery. Notable government funding initiatives announced include:
- $265 million to fund a suite of business risk management programs, which are delivered as part of the federal-provincial Canadian Agricultural Partnership (CAP);
- $200 million for the Accelerated Site Closure Program (ASCP);
- $193.6 million in targeted investments that will help meet the priorities of Indigenous communities, businesses, and organizations;
- $174.8 million for the 10% Saskatchewan Economic Recovery Rebate, which is available to all SaskPower customers, including businesses and individuals;
- $70 million in grants of up to $5,000 through the Small Business Emergency Payment Program for small and medium-sized enterprises directly affected by public health orders related to COVID-19;
- $27.3 million in increased funding for various programs, including the Workforce Development Program, Employability Assistance for Persons with Disabilities Top-up, Canada-Saskatchewan Job Grant, and Newcomer and Settlement Program; and
- $5 million for the Saskatchewan Tourism Sector Support Program to assist tourism-related businesses that have been significantly impacted by the pandemic.
More Information
Further information on Saskatchewan’s 2021 budget may be found on the province’s website at: https://www.saskatchewan.ca/government/budget-planning-and-reporting/budget-2021-22.
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.