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(April 27, 2006) Recent provincial budgets offered mixed news for foodservice operators. Alberta’s booming economy prompted helpful tax cuts and favourable spending while Quebec steered clear of new taxes that would have eaten into already lean profit margins. In Ontario, where operators have been hard-hit by a sluggish provincial economy and declines in tourism, no new tax breaks were announced. Budgets in New Brunswick and Saskatchewan offered tax cuts for both large and small businesses, and Saskatchewan backed away from threats of sales tax harmonization.  Small businesses will benefit from tax cuts in Prince Edward Island.

Riding high on record energy prices, Alberta forecasts a $4.1 billion budget surplus this year.  In its March 22 budget, the government committed to increased health care, education and infrastructure spending while also offering tax reductions and targeted spending that will help the foodservice industry.

The most significant tax cut is a 1.5% reduction in the general corporate income tax rate, which will fall to 10% – the lowest corporate tax rate of all Canadian provinces.

A 7% reduction in the school property tax rate will benefit property owners, while the increase in the basic personal and spousal income tax exemption – to $14,899 from $14,523 – will increase the take-home pay for all Albertans.

On the program spending side, an additional $321 million will be spent on workplace training, with an extra $6 million for immigration services.  Both spending initiatives are aimed at solving the labour shortage being felt across the province.  An additional $30 million has been earmarked to improve workplace safety.  Foodservice and other industries that rely on tourism will also benefit from increased spending – to a total of $48 million – on tourism promotion.

Operator fears about new taxes were allayed by Quebec’s March 23 budget, when the government extended an important tax credit and rejected calls for a parking tax in Montreal and a “fat tax” on potato chips and soft drinks.

Restaurateurs with tipped employees will see a $10.8 million tax break in the coming year, as the tax credit that enables operators to recover 75% of the payroll taxes paid on declared tips is extended to include statutory holidays.  Starting March 24, this extension will save the average operator $3,000 per year – the equivalent of nearly $11 million in savings for Quebec’s foodservice industry.

There had been open speculation that the government in Quebec would give municipalities the power to tax parking spaces to pay for public transit and other environmental initiatives – a move that sparked widespread public outcry when introduced in British Columbia.  One of the proposals included a flat $2.00 per square foot tax on existing parking spaces that would have cost restaurateurs thousands of dollars each year.  CRFA’s Council of Chain Restaurants: Quebec (CCRQ) partnered with other business groups and lobbied the government not to extend this new taxing power to municipalities.  The government listened, and decided not to introduce such a measure in its budget.

Ontario’s budget included no new taxes or tax increases, but also offered few measures to stimulate consumer spending.   With a focus on transportation and infrastructure spending, particularly in the Greater Toronto Area, this year’s budget offered little in the way of direct assistance for foodservice operators.

Indirectly, the hospitality industry will benefit from $49 million in spending to support Ontario’s major cultural attractions.  Tourism will be further aided by a one-year continuation in the retail sales tax exemption for destination marketing fees, a voluntary 3% fee imposed by the Greater Toronto Hotel Association.  Under this exemption, destination marketing fees billed on or before June 30, 2007 will be exempt from the 5% retail sales tax normally applied to accommodations.  In an effort to promote cross-border tourism and trade, the government will also invest $623 million to increase capacity at U.S. border crossings in Windsor, Niagara and Sarnia.

The province’s new Ministry of Health Promotion will receive an additional $68 million this year, to “advocate healthy living and to develop programs that prevent illness and promote wellness.”

New Brunswick’s March 28 budget included increased spending in nearly every government department, as well as some key tax cuts for businesses.

Corporate tax rates will drop to 12 per cent from 13 per cent effective Jan. 1, 2007, and small busineses will benefit from the lowest small business tax rate in the country when the rate falls to 1.5 per cent on July 1, 2006 and to 1 per cent the following year.  At the same time, the tax threshold for small businesses will increase to $475,000 on July 1, 2006 and to $500,000 on July 1, 2007, giving New Brunswick the highest small business threshold of all Canadian provinces.

The budget also included more than $100 million in spending to offset the rising cost of energy for businesses and consumers, including the introduction of an 8% cap on rate increases and a rebate for consumers on the provincial portion of the HST on home electricity and heating fuels.

PEI’s March 30 budget offered tax relief for small businesses, including a five-year plan to reduce the small business tax to one per cent from its current rate of 6.5 per cent.  The tax will be reduced by 1.1 per cent effective April 1 for the next five years, beginning in 2006.  At the end of the five years, PEI will offer the lowest small business tax rates in the country.  Although no further corporate tax cuts were announced, the government committed to looking at ways to reduce the province’s general corporate tax.

On the program spending side, the government announced an additional $750,000 in advertising and promotion spending for the tourism industry, in addition to the $4.2 million already provided to the Tourism Advisory Council for this purpose.

Saskatchewan

Businesses in Saskatchewan were recognized in the province’s Apr. 6 budget, which included significant tax cuts and backed away from threats of sales tax harmonization. 

The budget included a $95-million corporate tax cut set to grow to a savings of $240 million for Saskatchewan businesses by the time the plan is fully implemented in 2009-2010.  These tax savings will come be realized through the elimination of the corporate capital tax and a five point reduction in the corporate income tax rate – from 17 per cent to 12 per cent – by July 1, 2008.  The government also announced that it will increase the small business threshold from $300,000 to $500,000 by July 1, 2008. 

Recommendations to reduce the provincial sales tax and harmonize it with the federal goods and services tax were rejected – welcome news for the foodservice industry as harmonization would have effectively added a new 5% tax on restaurant meals.  CRFA estimated that a 5% tax on restaurant meals would result in a $47.4-million annual loss for Saskatchewan’s foodservice industry, or $31,000 for the average restaurant operator. 

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