Fact Sheet: Review of Tax Credits and Rebates

The Nova Scotia Department of Finance is evaluating its personal and corporate income tax credits and sales tax rebates. The review was announced today by Finance Minister Neil LeBlanc as part of the 1999-2000 budget address.

The evaluation will investigate the level of take-up, the effectiveness of achieving the credit objectives, the potential cost, and the investment payback of the tax expenditures.

The province wants to ensure that tax expenditures are accomplishing the goals intended at a reasonable cost. Tax expenditures or credits and rebates are tax dollars the government declines to collect in order to create a social or economic benefit.

CORPORATE INCOME TAX CREDITS
The review includes:

Research and Development Credit

• a refundable 15 per cent credit for undertaking research and development in Nova Scotia; total tax expenditure amounts to some $11.25 million

Investment Tax Credit

• a 30 per cent non-refundable tax credit for investments in new manufacturing plants and equipment; an estimated tax expenditure of $27.4 million

Film Tax Credit

• a 32.5 per cent credit for using Nova Scotia labour in film work undertaken in the province; worth some $4 million

Small Industry Tax Holiday

• a three-year tax holiday on the first $200,000 of taxable income of a newly established business in Nova Scotia; an estimated tax expenditure of $570,000

Small Business Rate Reduction

• an 11 percentage point rate reduction (from 16 per cent to five per cent) on the first $200,000 of small business taxable income; an estimated tax expenditure of $43.8 million

PERSONAL INCOME TAX CREDITS AND TAX EXPENDITURES
The review includes:

Equity Tax Credit

• a 30 per cent non-refundable credit for investment in new eligible business in the province; an estimated tax expenditure of $2.1 million

Labour-Sponsored Venture Capital

• a 15 per cent non-refundable credit on eligible investments in register labour-sponsored investment funds; a tax expenditure estimated at $400,000

Low-Income Tax Reduction

• a reduction of personal income taxes payable to low-income singles and families; tax expenditure estimated at $25.2 million

Other Programs

• review includes tax credits for political contributions and stock savings; combined, these programs provide a tax expenditure of approximately $450,000

HARMONIZED SALES TAX REBATES
The rebates under review include:

New Home Construction

• designed to encourage new home construction and reduce the cost for consumers, rebate is 1.5 points of the eight per cent provincial portion of the HST up to a maximum of $2,250; estimated provincial cost is $6.321 million

Municipalities

• rebate of both federal and provincial portion of the HST at a rate of 57.14 per cent of HST; estimated provincial cost is $18.852 million

Universities and Colleges

• rebate of both federal and provincial portion of the HST at a rate of 67 per cent of HST; estimated provincial cost is $7.15 million

Schools

• rebate of both federal and provincial portion of the HST at a rate of 68 per cent of HST; estimated provincial cost is $5.8 million

Hospitals

• rebate of both federal and provincial portion of the HST at a rate of 83 per cent of HST; estimated provincial cost is $12.049 million

Government-Supported Non-Profit Organizations

• rebate of both federal and provincial portion of the HST at a rate of 50 per cent of HST; estimated provincial cost is $1.055 million

Charities

• rebate of both federal and provincial portion of the HST at a rate of 50 per cent of HST; estimated provincial cost is $4.62 million

Printed Books

• rebate of provincial portion of the HST, leaving federal portion of seven per cent; estimated provincial cost is $5.322 million

Persons with Disabilities

• rebate of provincial portion of the HST up to a limit of $3,000 on a vehicle and $300 on a computer; estimated provincial cost is $200,000

Volunteer Fire Departments and Search and Rescue

• rebate of the balance of the provincial portion of the HST up to a limit that would apply to a emergency vehicle purchase of $185,000; estimated provincial cost is $500,000

The level of tax expenditures has been growing significantly in recent years, and some credits have been in place with little change over that time. The evaluation is part of the government's commitment to review all programs and services and will present a comprehensive analysis of how these credits are working for those who participate, as well as for the province. It will assist the government in its decisions about which incentives it will continue to offer.

The evaluation of several of the larger credits is expected to be completed by the spring budget. Based on the results of the evaluation, the government can consider any changes required.