Canada

2021-2022 provincial and territorial budgets commentary

INSIGHT ARTICLE  | 

The first federal budget in over two years proposed extensions to COVID-19 subsidies and key changes to legislation that will affect many taxpayers and industries. Many provinces have followed the federal government’s lead by proposing changes of their own, including a retail sales tax for online marketplaces and, in one case, a sugar sweetened beverages tax. Other provinces have extended their COVID-19 relief measures. Details on the specific COVID-19 tax measures for each province and territory can be found in our article on tax updates in Canada in response to COVID-19.

Most provincial governments avoided implementing tax rate changes for individuals and corporations with a few exceptions.

OFFICIAL BUDGET DATES:

Province/territory

Date the budget was tabled

Federal

April 19, 2021

Alberta

Feb. 25, 2021

British Columbia

April 20, 2021

Manitoba

April 7, 2021

New Brunswick

March 16, 2021

Newfoundland and Labrador

May 31, 2021

Northwest Territories

Feb. 4, 2021

Nova Scotia

March 25, 2021

Nunavut

Feb. 23, 2021

Ontario

March 24, 2021

Prince Edward Island

March 12, 2021

Québec

March 25, 2021

Saskatchewan

April 6, 2021

Yukon

March 4, 2021

 

Manitoba

On April 7, 2021, Finance Minister Scott Fielding tabled Manitoba’s 2021 budget. The budget builds on Manitoba’s speech from the throne and previous budgets and specifically focuses on Manitoba’s commitment to protect:

  1. Health care and vulnerable Manitobans
  2. Jobs and the restart of the economy
  3. Incomes by reducing taxes
  4. Education and child care
  5. The province’s financial, environmental and energy futures

The budget is projecting a deficit of $1.6 billion for the 2021 fiscal year.

BUSINESS INCOME TAX MEASURES

The government does not propose any changes to Manitoba’s corporate tax rates, or the $500,000 small business limit. However, the government proposes various tax credits to help small businesses rebound from the pandemic.

Small business payroll tax

Beginning on Jan. 1, 2022, the small business payroll tax (also referred to as the health and post-secondary education tax levy) exemption threshold will be raised from $1.5 million to $1.75 million of annual remuneration. In addition, the threshold at which employers pay a reduced rate will be raised from $3.0 million to $3.5 million. This measure is expected to help over 1,000 entrepreneurs and smaller businesses resident in Manitoba.

Small business venture capital tax credit

Effective as of the 2021 taxation year, the government is enhancing the small business venture capital tax credit. Specifically, the enhancements include increasing an investor's maximum eligible investment from $450,000 to $500,000 and increasing the maximum tax credit claimable against Manitoba income tax in a given year from $67,500 to $120,000. The government hopes this will make Manitoba more competitive and encourage investment in Manitoba businesses.

Interactive digital media tax credit

The government is also expanding the interactive digital media tax credit to provide interactive digital media companies with a refundable credit of up to 40 per cent on eligible project costs incurred to develop an interactive digital media product in Manitoba.

Originally set to expire on Dec. 31, 2022, the credit is now permanent. The government has also expanded eligibility to allow add-on activities, such as downloadable content, on-going maintenance and updates, and data management and analysis.

Film and video production tax credit

As part of the film and video production tax credit, the government is adjusting the calculation of the frequent filming bonus to “stop the clock” for two years.

The film and video production tax credit is available based on eligible salaries paid to Manitoba residents and qualifying non-resident employees for work performed on an eligible film or video produced in Manitoba. However, a company that produces three eligible films in two years earns an additional 10 per cent frequent-filming bonus on eligible salaries paid with respect to the third qualifying production.

With the budget announcement, all companies that were eligible for the bonus on March 31, 2020, will have that status remain in effect until March 31, 2022, at which point their frequent filming status resumes. For those production companies that continue to produce, their time period will advance as normal so as not to disadvantage them.

Book publishing tax credit

The 2021 budget removes the expiration date of Dec. 31, 2024, from the book publishing tax credit, thereby making it permanent. This tax credit provides Manitoba book publishers with a 40 per cent refundable credit on eligible Manitoba labour costs, up to a maximum of $100,000 per year per publisher.

Cultural industries printing tax credits

The cultural industries printing tax credit, scheduled to expire on Dec. 31, 2021, is extended for one year to Dec. 31, 2022. This tax credit provides Manitoba’s printing industry with a 35 per cent refundable credit on salary and wages paid to Manitoba employees.

Community enterprise development tax credit

The community enterprise development tax credit, scheduled to expire on Dec. 31, 2021, is extended for one year to Dec. 31, 2022. This tax credit assists community-based enterprise development projects by providing a 45 per cent refundable tax credit on eligible shares to Manitoba-resident investors that invest in business opportunities in their communities.

PERSONAL TAX MEASURES

The budget does not propose any changes to the personal tax rates but introduces a new teaching expense credit and an education property rebate.

Teaching expense tax credit

Effective for the 2021 tax year, the government introduced a new tax credit that will apply to purchases of eligible teaching supplies made by educators in childcare and K-12 facilities where there is no employer reimbursement. Educators can expect a 15 per cent refundable credit on a maximum of $1,000 in supplies ($150 maximum refund) parallel to the existing federal eligible educator school supply tax credit.

Education property tax rebate

The Manitoba government will begin phasing out education property taxes in the following manner as proposed in the budget:

  1. Owners of residential and farm properties will receive a 25 per cent rebate in each of the next two years of the school division special levy and the community revitalization levy payable. Residential properties include single dwelling units, condos and multiple unit dwellings.
  2. Owners of other properties (such as commercial, industrial, railway, institutional, pipelines and designated recreational) will receive a 10 per cent rebate of the total of both the school division special levy and the education support levy payable.

Properties that are exempt from education property taxes or that pay grants in lieu or payments in lieu of

taxes are not eligible for the education property tax rebate.

INDIRECT TAX MEASURES

Retail sales tax on streaming services and online marketplaces

The budget proposes the following retail sales tax (RST) changes, set to take effect retroactively on Dec. 1, 2021:

  1. RST will apply to audio and video streaming services and businesses inside or outside Canada providing such services will be required to register for and collect Manitoba RST.
  2. Online marketplace operators will be required to register for and collect Manitoba RST on taxable goods sold through their platforms.
  3. Online accommodation platforms will be required to register for and collect RST on taxable accommodations in Manitoba, booked through their platforms.

Although draft legislation has not yet been released, these rules are expected to be similar to those announced federally in respect of GST/HST and in other provinces in respect of their provincial sales taxes. This continues a trend of bringing non-residents of Canada (and Manitoba) into the sales tax net and shifting the sales tax collection burden to marketplace operators. Additionally, these rules will help to level the playing field between Manitoba businesses and businesses from outside of Manitoba who are selling to consumers in Manitoba.

RST exemption for personal services

Effective Dec. 1, 2021, personal services, including hair services, non-medical skin care services, aesthetician services, body modifications and spa services will be exempt from RST. RST will continue to apply to tanning services provided by a device that uses ultraviolet radiation.

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New Brunswick

New Brunswick tabled its 2021 budget on March 16, 2021, projecting a deficit of $244.8 million. The budget aims to support public health and a strong and resilient recovery for the future. The budget focuses on building a safe health care system for the residents, transforming the education system, boosting the private sector and developing sustainable economies.

PERSONAL AND BUSINESS TAX MEASURES

The budget did not introduce any new programs or changes to personal or corporate tax rates, or the $500,000 small business limit.

INDIRECT TAX MEASURES

Carbon tax

Effective April 1, 2021, the carbon-emitting products tax will increase from $30 per tonne to $40 per tonne, pursuant to the requirements of the federal carbon pricing backstop. As a result, fuel prices will increase by 2.21 cents per litre and diesel prices will increase by 2.68 cents per litre.

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Newfoundland and Labrador

Newfoundland and Labrador tabled its 2021 budget on May 31, 2021. The province’s budget, announced by Minister of Finance Siobhan Coady, focuses on putting the province in a surplus position by 2026–2027. Currently, the province is anticipating a deficit of $826 million for 2021–2022.

The budget focuses on investing in health care and education, building stronger communities and the economy, as well as creating jobs for a sustainable path forward.

BUSINESS INCOME TAX MEASURES

No changes are proposed to the corporate tax rates or the $500,000 small business limit.

PERSONAL TAX MEASURES

Personal income tax increase

Effective Jan. 1, 2022, the government is adjusting tax rates for higher income earners and adding additional brackets for those earning more than $250,000. The changes are as follows:

Bracket

Present

Budget 2021

Up to $135,973

No change

$135,974–$190,363

17.3%

17.8%

$190,364–$250,000

18.3%

19.8%

$250,001–$500,000

18.3%

20.8%

$500,001–$1,000,000

18.3%

21.3%

More than $1,000,000

18.3%

21.8%

 

Physical activity tax credit

The budget introduces a new refundable physical activity tax credit on expenses of up to $2,000 per family ($174 value). This credit, estimated at $7 million, is intended to be a helpful incentive for families as they look to access sport and recreational activities; it also supports the local health and wellness industry.

Green initiatives

As part of Newfoundland and Labrador’s green initiatives, the government is providing two rebates. First, individuals who transition their homes to electricity from oil as a sole source of heat can receive a rebate up to $2,500 toward retrofitting a home. Second, consumers who purchase new electric vehicles can receive a rebate of $2,500.

INDIRECT TAX MEASURES

Sweetened beverage tax

The budget introduces a sugar sweetened beverage tax of 20 cents per litre, to take effect on April 1, 2022. Additional details, including the types of beverages affected and the method of collection, are expected to be announced at a later date.

Tobacco tax

The budget includes a tobacco tax increase of 3 cents per cigarette and 6 cents per gram on fine cut tobacco.

These indirect measures are intended to address health concerns with respect to tobacco use and the consumption of sugar-sweetened beverages.

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Northwest Territories

Finance Minister Caroline Wawzonek tabled Northwest Territories’ 2021 budget on Feb. 4, 2021. The focus of the budget is to bring stability to the Northwest Territories, and to build on the foundations for economic growth for a healthy, resilient and more diverse economic future. Specifically, the budget focuses on social programs, economic development and combatting climate change

PERSONAL AND BUSINESS  TAX MEASURES

No changes are proposed to personal income tax rates, the general corporate tax rate, or the $500,000 small business limit.

Small business tax rate

Effective Jan. 1, 2021, the small business tax rate is reduced from a rate of 4 per cent to 2 per cent.

OTHER TAX MEASURES

Property mill rates

The budget proposes that the property mill rates and some fees will be indexed to inflation effective April 1, 2021.

INDIRECT TAX MEASURES

Carbon tax

Carbon tax rates in the Northwest Territories will increase to $40 per tonne of carbon dioxide equivalent emissions on July 1, 2021. This will add 2.40 cents in additional tax to a litre of gasoline and corresponding increases to other carbon-based fuels. In addition, the cost-of-living offset will increase on July 1 to $208 per adult and $240 per child to assist residents in adjusting to the higher carbon price.

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Nova Scotia

Nova Scotia tabled its 2021 budget on March 25, 2021. The government is forecasting a deficit of $584.9 million. The budget focuses on economic recovery by undertaking investments to help businesses grow strong financial management. It also aims to strengthen health care development for improving mental health and ensuring long-term care of Nova Scotians.

PERSONAL AND BUSINESS TAX MEASURES

No changes are proposed to personal income tax rates, corporate tax rates, or the $500,000 small business limit.

OTHER TAX MEASURES

Extension of equity tax credits for CEDIFs

The equity tax credit for investments in community economic development investment funds (CEDIFs) provides a 35 per cent tax credit for individuals who invest up to $50,000 in a taxation year in CEDIFs and hold their shares for a five-year period. The budget extends the tax credit, set to expire on Feb. 28, 2022, by another 10 years to Feb. 28, 2032.

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Nunavut

On Feb. 23, 2021, the minister of finance, George Hickes, tabled Nunavut’s 2021 budget. Building on the government of Nunavut’s mandate, the budget focuses on individual and community self-reliance and well-being, developing Nunavut’s infrastructure and growing the economy, and job preparation. Due to the effects of COVID-19, the government is forecasting a deficit of $14.3 million in 2021–2022.

While the government is proposing to invest in various initiatives, there are no proposed changes to personal income tax rates, corporate tax rates, or the $500,000 small business limit.

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Prince Edward Island

On March 12, 2021, Prince Edward Island’s (PEI) minister of finance, Darlene Compton, tabled its 2021 budget, projecting a deficit of $112 million. The budget aims to assist residents and businesses with recovering from the pandemic by investing in health care, education, the job-market, and sectors and industries highly affected by COVID-19.  

BUSINESS INCOME TAX MEASURES

Reduction in small business tax rate

No changes are proposed to the general income corporate tax rate in the budget. However, effective Jan. 1, 2022, the budget will lower the small business tax rate on the first $500,000 of income from 2 per cent to 1 per cent. Consequently, the combined small-business tax rate corporate income tax rates will total 10 per cent (on first $500,000 of active business income).

PERSONAL TAX MEASURES

Increasing basic personal income tax exemption

The basic personal amount is a non-refundable tax credit, which aims to provide a reduction of income tax for every individual. The budget proposes to increase the basic personal income tax exemption from $10,500 to $11,250 for the 2022 tax year, moving toward a $12,000 exemption in 2023.

Increasing low-income, tax reduction tax threshold

PEI offers a tax reduction program to low-income residents that provide tax credits to offset or eliminate provincial income tax. For the 2022 tax year, the budget proposes to increase the tax threshold from $19,000 to $20,000 for low-income residents.

OTHER TAX MEASURES

Grant for tourism businesses

To help the tourism sector recover from the effects of COVID-19 and ease re-opening in 2021, the budget introduces a non-repayable tourism activation grant. The grant, ranging from $2,500 to $50,000, aims to assist eligible tourism businesses with capital and/or maintenance costs associated with opening for the 2021 season.

Small business assistance grant

The budget introduces a new small business assistance grant to provide small-business owners and entrepreneurs access to professional services and advice in the areas of finance, marketing, quality control and production efficiencies. Under the program, the applicants will receive a 50 per cent reimbursement to provide such services to the small-businesses, up to a maximum of $4,000.

Home repair grants

Budget 2021 proposes to double the grant thresholds for three home repair programs. The eligible grant for the Seniors Safe at Home will increase from $5,000 to $10,000, and the Seniors Home Repair program will increase from $2,000 to $4,000.

Additionally, the PEI Home Repair Program funding for seniors and families in need will increase from $6,000 to $12,000 and the PEI Home Repair Program funding for those with disabilities will increase from $8,000 to $16,000.

Electric vehicle incentive

To reduce the impact of greenhouse gases and support more sustainable transport in PEI, the budget introduces a new electric vehicle incentive. The incentive provides financial assistance of up to $5,000 to the Islanders who purchase new or used electric vehicles and electric vehicle chargers. In addition, an incentive of $2,500 is also available for buying plug-in hybrid vehicles.

Energy efficiency equipment program

The budget introduces the energy efficiency equipment program that provides financial aid for
Islanders to transition from carbon-emitting fuel sources. The program aims to provide rebates to low-income Islanders for the installation of certified heating equipment including heat pumps, water saving devices, biomass heating devices and other energy saving products. 

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Saskatchewan

On April 6, 2021, Finance Minister Donna Harpauer tabled Saskatchewan’s 2021 budget. The estimates provided in the 2021 budget show a deficit of $2.6 billion for the 2020–21 fiscal year. The budget’s focus is threefold:

  • Protect Saskatchewan people through the pandemic
  • Build Saskatchewan through various investments in infrastructure
  • Grow Saskatchewan through various investments and incentives

BUSINESS INCOME TAX MEASURES

No changes are proposed to the general income corporate tax rate.

Increase in the small business tax rate

As a response to the pandemic, the government temporarily reduced the small business tax rate from 2 per cent to 0 per cent on Oct. 1, 2020. The budget proposes to increase the rate to 1 per cent on July 1, 2022, and return to 2 per cent on July 1, 2023, as Saskatchewan recovers from the pandemic. No changes are proposed to the $600,000 small business limit.

Technology start-up incentive

The government is extending the technology start-up incentive, to encourage investment in technology, bring new products to market and create jobs. Originally announced in the 2018 budget, the incentive was set to expire at the end of 2021. With the goal of growing Saskatchewan’s technology sector, the program is extended for an additional five years, through to 2025-26.

The program provides for a non-refundable 45 per cent income tax credit for individual, corporate or venture capital corporation investments in eligible start-up businesses (ESB) that are developing new technologies, or applying existing technologies in a new way, to create new proprietary products, services or processes that are repeatable and scalable.

In addition to the five-year extension, the following changes will be made:

  • The amount that an ESB can raise under the program will double, from $1 million to $2 million
  • The carry-forward period to claim unused tax credits increases from four years to seven years
  • An annual cap of $2.5 million per year is established on the maximum value of tax credits that can be issued

PERSONAL TAX MEASURES

No changes are proposed to personal income tax rates, however, the government is re-introducing the annual indexation of provincial income tax brackets ensuring that they are reflective of inflation.

Additionally, the budget proposes a new home renovation credit and reintroduces the active families benefit.

Home renovation tax credit

Last fall, the government introduced the home renovation tax credit to help stimulate residential construction activity and improve housing affordability. The credit provides a 10.5 per cent tax credit on up to $20,000 of eligible home renovation expenses completed between Oct. 1, 2020, and Dec. 31, 2022, beginning with the 2021 tax year.

Specifically, homeowners may save up to $1,155 in provincial income tax in 2021 by claiming a tax credit on eligible home renovation expenses incurred between Oct. 1, 2020, and Dec. 31, 2021. A further $945 in savings may be claimed in 2022 in respect of eligible expenses incurred between Jan. 1, 2022, and Dec. 31, 2022.

Active families benefit

As part of the budget, the government is restarting the active families benefit. The benefit provides families who register their children in qualifying sports, arts and cultural activities and whose combined net income is $60,000 or less, with a refundable tax credit of $150 per year per child.

Families of children with a disability can claim an additional $50, for a total tax credit of up to $200 per year per child.

OTHER MEASURES

Education property tax mill rates

The budget is introducing changes to the education property tax (EPT) mill rates to slightly increase overall revenues to the province in line with year-over-year inflation. The 2021 EPT mill rates for the various property classes will be agricultural 1.36, residential 4.46, commercial/industrial 6.75, and resource 9.79. This is a slight increase over the 2020 mill rates with the exception of agricultural.

INDIRECT TAX MEASURES

Taxation of vapour products

The budget introduces a vapour products tax (VPT) at a rate of 20 per cent on the retail price of all vapour liquids, products and devices. The VPT takes effect Sept. 1, 2021. Retailers who are required to collect the VPT will be required to obtain a VPT license, charge the tax and file VPT returns.

Taxation of heat-not-burn tobacco

The budget brings heat-not-burn (HNB) tobacco sticks in line with existing tobacco legislation, by adding HNB tobacco sticks as a separate category under the Tobacco Tax Act at a rate of approximately 75 per cent of the tax rate on tobacco cigarettes, effective June 1, 2021. The current tax rate on cigarettes is $0.27 per stick, resulting in a HNB tax rate of $0.205 per stick.

The term "heat-not-burn" refers to tobacco heated by an electrically powered element or carbon instead of being combusted.

Taxation of electric vehicles

The budget also introduces a new annual tax of $150 for each passenger electric vehicle registered in Saskatchewan, effective Oct. 1, 2021. This tax is introduced to help pay for maintenance of provincial roadways that are traditionally funded by the provincial fuel tax, and where no similar tax is paid by owners of electric vehicles as they do not consume taxable fuels. Saskatchewan Government Insurance will collect this tax at the time of annual registration.

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Yukon

On March 4, 2021, Minister of Finance Sandy Silver, tabled Yukon’s 2021 budget. The minister projects a deficit of $12.7 million for the 2021–2022 fiscal year. The budget contains no new taxes and no tax increases.

The budget focuses on supporting Yukoners through COVID-19, putting people first by investing in health and social welfare programs, investing in a clean future, and investing in measures to facilitate the relationship and reconciliation between First Nations and the government.

BUSINESS AND PERSONAL TAX MEASURES

The government does not propose any changes to personal income tax rates or the general corporate tax rate in the budget. However, effective Jan. 1, 2021, the government reduced the Yukon small business tax rate from 2 per cent to 0 per cent, applicable on the first $500,000 of income.

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