Newfoundland and Labrador's government raised a slew of taxes Thursday, including the HST and personal income taxes, and cut jobs in a budget designed to put the province on a sustainable fiscal path.
The problem: The deficit ballooned to $2.2-billion for fiscal 2015-16 as a result of the steep decline in oil prices and higher government spending. The government projected a smaller deficit of $1.8-billion for fiscal 2016-17 due to its tax hikes and spending cuts.
Revenue shortfall: A third of the province's revenues come from oil royalties, and that source of funding has shrunk 70 per cent over two years due to the drop in oil prices and lower production. The government now expects $502-million from offshore royalties for fiscal 2016-17, the lowest level in a decade. High crude prices helped the province pull in an average of $2.1-billion in oil royalties during the boom years.
Taxes, levies and fees: The Liberal government raised taxes across the board, from individuals and companies to gas, tobacco and diesel. The gas tax will increase by 16.5 cents per litre. Income taxes will increase for two consecutive years. The HST sales tax will be raised to 15 per cent from 13 per cent, breaking the government's campaign promise not to raise the HST. The budget also imposes a deficit reduction levy on taxable income of $20,000 or more, as well as a slew of new and higher fees, including on ferry rides. This will generate $647-million in additional revenue for this fiscal year.
Jobs: The Liberals broke another campaign promise to not cut public-sector jobs. The budget outlines plans to eliminate 450 of what it calls "full-time equivalent" jobs across public agencies, boards and commissions, as well as 200 government positions. The budget did not provide a total number of job cuts.
Borrowing: Credit rating agencies have said they wanted to see a "credible" plan to improve the province's financial position. A downgrade would require the government to use even more revenue to pay the interest on its debt.