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How PST and income tax changes will affect Saskatchewan

Saskatchewan Budget 2017: sales tax increasing to deal with $685M deficit
WATCH ABOVE: The PST rate is now six per cent, up from five per cent and the PST is now applied to more things. To break down what that means for you at home, we’re joined by Blake Lough.

The Saskatchewan government announced a one percentage point increase to the provincial sales tax (PST) along with a number of other tax changes in the 2017-18 budget.

Here are how the changes will affect people and companies.

FULL COVERAGE: Saskatchewan Budget 2017: sales tax increasing to deal with $685M deficit

Provincial sales tax

Effective March 23, 2017, the provincial sales tax is increasing to six per cent. Officials expect the increase will raise an additional $242.1 million in revenue.

Children’s clothing

The PST exemption on children’s clothing is being removed on April 1, 2017. Officials said this will eliminate a source of abuse and result in tax compliance and better administration efficiencies and result in $15.6 million in revenue.

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Restaurant meals and snack foods

PST will be applied to restaurant meals and snack foods starting on April 1, 2017, which is expected to add $94.7 million in revenue.

Vehicle trade-in allowance

The value of a vehicle trade-in will no longer be allowed to be deducted when determining the PST on the purchase of new vehicles or those that have not been previously taxed in Saskatchewan. The measure, which goes into effect on April 1, 2017, is expected to generate $17.8 million in revenue.

Construction services

PST will now be required to be paid on the total contract price for repairs, renovations or improvements to property. The measure affects any contracts entered into on or after April 1, 2017. Contractors will be eligible to acquire tax-free building material to fulfill a contract. The government expects to raise $344.6 in revenue.

Insurance premiums

The PST base is being expanded to include insurance premium payments on or after July 1, 2017, raising an estimated $157.9 million in revenue. This includes premiums for all life, accident and health insurance, along with property, vehicle, liability and casualty insurance. It will also include all agriculture insurance.

Fuel tax exemption

The fuel tax exemption for bulk gasoline purchases is being eliminated on April 1, 2017. For diesel, it is being reduced to 80 per cent of the purchase. Fuel tax revenue is expected to increase $40.2 million with the change.

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Sin taxes

Smokers will have to pay more for cigarettes. The tobacco tax is going up two cents per cigarette starting on March 23, 2017.

The price of alcohol is going up on April 1, 2017 when new liquor mark-ups come into effect.

Most beer products will increase by 6.8 per cent, coolers by six per cent, wines by 5.3 per cent and four per cent for most spirits.

Personal income tax changes

The government is making some changes to the provincial income tax system.

Personal income tax rates will be reduced by a half-point on July 1, 2017 and on July 1, 2019. Government officials expect the change will save taxpayers $82.2 million in 2017-18.

Credits for post-secondary tuition and education expenses will be eliminated on July 1, 2017.

The employee’s tools tax credit will be eliminated for the 2017 tax year.

The labour-sponsored venture capital tax credit rate is being reduced from 20 per cent to 15 per cent in the 2018 tax year.

Indexation of the personal income tax system is being suspended starting in the 2018 tax year.

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Corporate income tax changes

The general corporation income tax rate will be reduced by a half-point on July 1, 2017 and July 1, 2019, resulting in savings of $25.3 million to Saskatchewan businesses in 2017-18. Officials said it will be the lowest tax rate in the country.

The Saskatchewan commercial innovation incentive will offer a six per cent corporate tax rate on income earned from the commercialization of qualifying intellectual property in the province.

The research and development tax credit is being reformed on April 1, 2017. It will give small- and medium-sized innovation companies a refundable tax credit while putting a cap on the existing non-refundable tax credit.

The investment tax credit rate for capital acquisitions for use in manufacturing and processing will increase to six per cent on March 23, 2017.

The special provision allowing credit unions to apply the small business tax rate to income above the $500,000 small business income limit is being phased out over a four-year period starting in 2017.

The corporate capital tax rate for large financial institutions will rise from 3.25 per cent to four per cent on April 12, 2017.