Canada: 2016 New Brunswick Budget Summary

New Brunswick Finance Minister Roger Melanson tabled the province's fiscal 2016–17 budget on February 2, 2016. The government remains committed to eliminating the deficit and reducing net debt. The projected deficit for 2015–16 is expected to hit $466.4 million, with a deficit of $347 million projected for 2016–17. The province is projecting a gradual return to surplus by 2020-21.

A number of tax measures were included in this budget, including a widely anticipated increase in the HST rate. These measures are discussed below.

Business tax measures

Corporate tax rates

No changes are proposed to the $500,000 small business limit or the small business tax rate. However, the general corporate income tax rate will be increasing from 12 percent to 14 percent, effective April 1, 2016. The new corporate income tax rate will match that of Newfoundland and Labrador, but will remain below Nova Scotia and Prince Edward Island (at 16 percent).

New Brunswick's new corporate tax rates for 2016 and 2017 are summarized in Table A below:

Table A

New Brunswick corporate tax rates

Year Small business tax rate General corporate tax rate Manufacturing and processing tax rate
2016 4% 13.5%1 13.5%
2017 4% 14% 14%

Financial corporation capital tax

Effective April 1, 2016, the financial corporation capital tax rate will increase from 4 percent to 5 percent for banks.

Personal tax measures

Personal income tax rates

Retroactive to January 1, 2016, the government eliminated the top marginal personal income tax rate of 25.75 percent (which applied to taxable income over $250,000) and lowered the previously second highest marginal rate from 21 percent to 20.3 percent, for taxable income over $150,000. This measure was announced in response to the introduction of a new 33 percent federal top marginal income tax rate, effective January 1, 2016, for taxable income over $200,000.

Table B illustrates the top combined federal-New Brunswick marginal rate of tax on various types of income for 2016 for the top two income tax brackets:

Table B

Taxable income $150K - $200K Over $200K
Interest 49.30% 53.30%
Capital gains 24.65% 26.65%
Eligible dividends 30.75% 36.27%
Regular dividends 40.69% 45.37%

Sales tax measures

Harmonized sales tax (HST)

For the province to afford its continued investments in health and education, the government has decided to raise the HST rate.

Effective July 1, 2016, the provincial portion of the HST rate will increase by two percentage points from eight percent to 10 percent, raising the joint federal-provincial HST rate from 13 percent to 15 percent. New Brunswick will now have the same HST rate as Nova Scotia and a rate that is slightly higher than Quebec's combined rate of 14.975 percent.

To lessen the impact of the HST increase on low-to-middle income households, a refundable provincial HST credit of $300 for individuals, $300 for spouse or equivalent, and $100 per child under the age of 19 will be provided. Single parent families will receive a $300 credit for their first child.

The full HST credit will be provided to New Brunswickers with a family income of less than $35,000 per year, and will then be reduced by two cents for every dollar of income above $35,000 per year. That means individuals with income of less than $50,000 per year, or a family of two adults and two children with income of less than $75,000 per year, could receive some benefit from the HST credit.

Other measures

Real property transfer tax

The real property transfer tax is a one-time payment on the purchase of a property when the deed is registered. Effective April 1, 2016, the real property transfer tax will increase from 0.5 percent to one percent.

Tobacco taxes

The tax rate that is applied to tobacco products in New Brunswick will be increased by 6.52 cents per cigarette or gram of loose or fine cut tobacco over the next two years. This will eventually bring the tax rate from 19 cents to 25.52 cents, the same rate as Nova Scotia.

An initial increase of 3.26 cents will be effective midnight February 2, 2016 and will bring the tax rate to 22.26 cents per cigarette or gram of loose or fine cut tobacco. A second increase of 3.26 cents will be effective on February 1, 2017.

Footnote

1. Prorated rate based on a December 31 year-end

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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