Questions raised about surplus
Government underestimated corporate tax revenue in each of last three years
Opposition members are raising questions about the $75 million budget surplus announced by the province on Wednesday.
Premier Wade MacLauchlan and Finance Minister Heath MacDonald announced on Wednesday the province’s balance sheet for the 201718 fiscal year notched a $75 million surplus. In April of 2017, the province had forecast a surplus of $600,000 for the 2017-’18 year, an amount which was later updated last April to $1.2 million.
MacDonald said the jump from a $1.2 million to $75 million for the period ending March 31, 2018 was due to much higher than expected corporate income, personal income tax and HST revenues. The province has applauded this unexpected windfall and has cast it as an indicator of a surging economy boosted by strong immigration growth.
The surplus will be applied to the province’s debt.
But Hannah Bell, finance critic for the Green Party, said the news was not all rosy. She said the provincial government has had a pattern of underestimating tax revenues from corporate taxation over the last two years.
Bell also said the province may still be taking in more revenue than it is budgeting.
“Those increases in revenues, they’re still ongoing. So now what we have, the government has an undisclosed operating surplus,”
Bell said. “We should not be surprised that tax revenues have increased given the increase in provincial population and the focus on economic growth.”
Bell said it was good news that the Island would be applying the $75 million surplus to pay down the Island’s considerable debt. But she also said many Islanders are falling behind despite the booming economy. She said social program expenditures as a percentage of GDP are at a fiveyear low.
“We’ve been hearing daily from vulnerable Islanders who are being left behind by an economy ‘on a tear,’ and this increased revenue could provide the means to increase program spending in critical areas of need including housing, healthcare and education,” Bell said.
PC finance critic Brad Trivers also took issue $1 billion in total tax revenue taken in by the province.
Trivers said the spending of the province has not reflected the needs of Islanders.
“Government spending is at an all-time high yet wages on P.E.I. continue to be the lowest in the country,” Trivers said. “Government is crowing about prosperity. But it has come from the pockets of hard-working Islanders - not good fiscal management. High taxes and low wages may be a formula that government likes, but it doesn’t work for ordinary Islanders struggling to get by.”
The biggest discrepancy in budgeted versus actual revenue has been through tax revenue. In all, the province collected $38 million more in corporate income tax, $25 million more in HST and $8 million more in personal income tax than budgeted for 2018.
This accounted for most of the $120 million of additional tax revenue seen by the province for the previous year.
Corporate income tax revenues were significantly underestimated over the last two budget cycles. In 2016-17 the province collected $17.7 million more corporate tax than budgeted, while it collected $21.1 million more corporate tax than budgeted in 2015-16.
According to a representative from the Department of Finance, the province does not receive final revenue numbers from the Canada Revenue Agency until May and June. The revenue projections from the last few budget cycles have remained “conservative” because of the lag in receiving this information, the representative said.
“Those estimates are continuously refined right up to the time that the financial statements audited by the Auditor General are tabled in the House,” read an e-mailed statement from the Department of Finance.
The 2018 public accounts were audited by the island’s Auditor General.