ST. JOHN'S, N.L. — Taxpayers in Newfoundland and Labrador are going to pay more as the provincial government looks for ways to cope with a downturn in oil and commodity prices in the budget it tabled Thursday.
The most noticeable tax change is an increase in the harmonized sales tax, which jumps by two percentage points to 15 per cent on Jan. 1, 2016.
Even with the new revenue, the government's $8.1-billion budget for 2015-16 still forecasts a $1.1-billion deficit.
Finance Minister Ross Wiseman said the budget reflects the province's economic reliance on resources.
"We're optimistic that oil will recover, commodity prices will recover," he told a news conference. "We're a resource province, and one of the challenges of being a resource province, you're exposed to those kinds of vulnerabilities.
"What we're trying to do now is manage our way through that process."
Wiseman is also forecasting deficits totalling $1.6 billion for the next three fiscal years, with economic contraction and higher unemployment through 2018.
The province's real gross domestic product is predicted to shrink by 0.3 per cent this year, and by 1.6 per cent in each of the next two years. Unemployment is projected to go from 12.4 per cent this year to 13.3 per cent by 2018.
For now, Wiseman said the Progressive Conservative government has chosen a balanced approach of borrowing, tax hikes and modest spending increases because it doesn't want to shock the economy.
The Tories have held a majority in the legislature since 2003 and are expected to call an election this fall.
The budget includes 35 fee hikes on everything from drivers' licences to public swimming. The higher fees are expected to raise about $18 million.
The government is also bringing in new tax rates for the highest income earners.
A modest $3-million surplus is forecast for the 2019-20 fiscal year, when the province expects oil prices return to US$90 a barrel.
The province relies on offshore oil revenues for about one-third of its revenues. It has been hit hard since Brent crude slid to about US$66 a barrel from a high of US$115 last June.
For 2015-16, the budget is anchored on an average price of US$62 a barrel. The last budget relied on US$105 but the average was just over US$83.
The province took in $1.6 billion in oil royalties in 2014-15 compared to the $2.4 billion it originally forecast. It's projecting $1.2 billion in oil royalties this fiscal year.
Net debt is predicted to rise to $11.5 billion in 2015-16 from $10.2 billion.
