As tax filing deadline looms, The Conference Board of Canada measures personal and business tax burdens
OTTAWA, May 2, 2016 /CNW/ - The tax increases announced in the recent provincial budget will reset the tax competitiveness of Newfoundland and Labrador compared to other provinces.
Before the budget, Newfoundland had one of the lowest provincial net tax burdens on businesses and the lowest provincial personal tax burden among provinces east of the Ontario-Quebec border, according to a new Conference Board of Canada report, Benchmarking Provincial Tax Burdens.
- This analysis provides a snapshot of how Newfoundland and Labrador's business and personal tax burdens compared to other provinces prior to the recent budget.
- Based on this analysis, Newfoundland and Labrador had the fourth-lowest provincial net business tax burden among the provinces.
- Newfoundland and Labrador's provincial personal tax burden was in the middle of the pack among the provinces, based on this analysis.
This report compares the provincial tax burden on businesses and individuals among provinces based on the calculation of average provincial tax burden ratios. The analysis is based on data through 2011 for business taxation and 2012 for personal taxation. (which were the most recent data available at the time this research was completed).
"This analysis provides a snapshot of where Newfoundland and Labrador stood compared to its peers prior to the recent budget. The tax changes announced will affect Newfoundland and Labrador's tax competitiveness compared to other provinces, although it is too soon to tell exactly how significant the impact will be," said Julie Adès, Senior Economist.
In terms of business taxation, 2011 was the latest year for which data on gross output in the business sector was available at the time this report was completed. Based on this data, Newfoundland and Labrador had the fourth-lowest provincial net business tax burden behind Saskatchewan, New Brunswick and Alberta.
Newfoundland and Labrador had one of the highest provincial corporate income tax rates at 14 per cent. That rate has been increased to 15 per cent in the 2016 budget.
Based on the data used in this analysis, Newfoundland and Labrador had the third lowest provincial sales tax burden on businesses, behind only Alberta (which has no such tax), and Quebec. However, the provincial government announced its intentions in the budget to increase the harmonized sales tax (HST) from 13 per cent to 15 per cent later this year.
In terms of the tax burden on individuals, Newfoundland and Labrador ranks in the middle of the pack based on data from 2012, the latest for which it was available at the time this report was completed. The four western provinces and Ontario have lower provincial personal tax burdens than Newfoundland and Labrador.
In terms of provincial personal income tax as a share of personal income, Newfoundland and Labrador ranks sixth in this analysis. In 2015, the province introduced two new tax brackets: one for those earning between $125,000 and $175,000, and one for those earning more than $175,000.
In the 2016 budget, the province announced that the tax rates in all five income brackets will increase this year and in 2017.
Newfoundland and Labrador ranks well among the provinces when property taxes and social security contributions are incorporated into the overall provincial personal tax burden. However, Newfoundland and Labrador's ranking deteriorates when provincial sales taxes paid by individuals are added to the analysis. As previously cited, the HST rate is set to increase from 13 per cent to 15 per cent on July 1, 2016.
The analysis does not assess the value of goods and services received by provincial residents for their taxation.
Business taxation includes: provincial corporate income taxes, social security contributions, payroll taxes, and property taxes and provincial sales taxes, as well as the provincial segments of the HST.
Personal taxation includes: provincial personal income taxes, social security contributions paid by employees, property taxes, and provincial sales taxes as well as the provincial segments of the HST.
Join Julie Adès and Matthew Stewart for a live webinar to discuss the findings for all provinces on June 1, 2016 at 3:30 PM NDT.
The report was produced for the Centre for Tax Analysis, Fiscal Incentives and Competitiveness (TAFIC). Launched in 2014, TAFIC provides Canadian business leaders and policy-makers with credible, leading-edge quantitative research on all aspects of the Canadian system of taxation and fiscal incentives. Using sophisticated econometric tools to measure the impact of proposed reforms on the Canadian economy, TAFIC publishes evidence-based and accessible reports on key issues related to taxation and fiscal incentives.
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