Saskatchewan 2017-2018 budget affected by low oil & gas revenues

 

A struggling oil and gas industry has left some pretty big gaps in Saskatchewan’s revenue stream, and the government has responded with a number of significant changes to the budget. Tabled on March 22, 2017, the new budget not only includes an increase to the provincial sales tax rate (up from 5% to 6%) but also expands the list of items that will be subject to PST. There are several changes to personal tax as well.

Personal tax rates – good news and not so good news
Provincial personal income tax rates will be reduced by half-point increments on July 1, 2017 and July 1, 2019. Interestingly, these are the first tax rate changes Saskatchewan has had since 2003. That’s the good news. The not so good news is that indexation – the measure put on personal taxes to account for inflation, has been suspended for 2017-2018. Indexation widens lower tax brackets, helping to ensure taxpayers’ burdens stay in step with the cost of living. Eliminating indexation means your wallet will be leaner in the next tax year because any relief from the drop in rates will be eaten up by inflation.

We’ve summarized how personal tax will roll out between 2016 and 2020 in the chart below.

Saskatchewan Tax Rates
Taxable income thresholds (2016) 2016 2017 2018 2019 2020
Under $44,601 11% 10.75% 10.5% 10.25% 10%
$44,601 to $127,430 13% 12.75% 12.5% 12.25% 12%
Over $127,430 15% 14.75% 14.5% 14.25% 14%

The math on education fees
Following the lead of the federal government, Saskatchewan will eliminate the provincial education amount in 2017, and go a step further by ending the allocated amount for tuition fees. This change won’t take effect until July 1, 2017, so you can still claim amounts paid before that date on your 2016 tax return. You can also carry forward any unused provincial tuition/education amounts from prior years.

See ya to the tools tax credit
This very popular tax credit has been eliminated this year. Employees in certain trades who need to purchase specific tools for their work will no longer be able to use the cost of those tools as a deduction.

Venture capital is being revamped
Venture capital corporations eligible for the Labour Sponsored Venture Capital Tax Credit will pay less in 2018, as the rate goes down from 20% to 15%. The maximum creditable investment remains consistent at $10,000, and the maximum credit that can be claimed is reduced to $750 from $1000.

The business of business taxes
General corporate income taxes will undergo a two-phase reduction over the next two years, down half a point on July 1, 2017 and another half point again on July 1, 2019 – effectively bringing the rate down from 12% to 11% (provincial dividend tax credit calculations will be modified accordingly). Small businesses can breathe a sigh of relief too – their rate remains the same at 2%.

Higher PST and more occasions to pay it
There are three changes to PST in the new budget (over and above the 1% rate increase.) Two of the changes begin April 1, 2017, and the third starts on July 1, 2017.

On April 1st, all contracts for the repair, renovation or improvement of real estate will include PST. Contractors are now eligible though, to acquire tax-free building materials on certain work, so there’s a bit of relief on the bill that way.

Also starting April 1st is a change to how PST is calculated when a trade-in vehicle is part of the deal. Trade-in allowances are no longer deductible when determining PST on vehicles that are either new or have not previously been taxed in Saskatchewan.

Lastly, the number of goods subject to PST has grown. Children’s clothing, restaurant bills and insurance premiums will be subject to 6% PST as of July 1, 2017.

Working Income Tax Benefit changes are TBD
We’re expecting to see some enhancements to the Working Income Tax Benefit policy in 2017 that should help counterbalance the PST increase. Details on these changes have yet to be announced.