Since 1998-1999, Nova Scotia’s annual revenues have been increasing an average of 5.2 per cent, with provincial sources growing on average 5.5 per cent and federal sources 4.8 per cent.
In 2008-2009, Nova Scotia’s total provincial revenue sources accounted for 64.4 per cent of total revenue at $5.465 billion. Federal revenue sources accounted for the remaining 35.6 per cent at $3.015 billion.
Growth in revenues started to level off in the end of 2008, reflecting the downturn in the economy. These numbers were reflected in the December, 2008, budget forecast update.
As of the December 19, 2008 budget forecast, Nova Scotia is forecasting total revenues of $8.481 billion for 2008-2009, including net income from Government Business Entities (GBEs).
Income taxes are the main provincial source of revenue, totalling $2.171 billion – with $1.784 billion in personal and $386 million corporate income taxes
Harmonized Sales Tax revenues are forecast at $1.156 billion and Motive Fuel Taxes, $247.6 million. Petroleum Royalties are expected to generate $500.8 million.
Revenues generated by GBEs such as the Nova Scotia Liquor Corporation are forecast at $360.9 million and revenues from other provincial sources are $1.028 billion.
Revenue from federal sources makes up 35.6 per cent of Nova Scotia’s budget in 2008-2009. These include:
- Equalization: $1.465 billion
- Canada Health Transfer: $668.7 million
- Canada Social Transfer: $297.1 million
- Crown Share: $95.1million
- Other federal sources = $489.8million
Revenue Challenges
Nova Scotia’s revenues are expected to soften considerably in the coming months due to the downturn in the economy.
Many revenue categories will either flatten or decline and there are no extra revenues expected from other sources.
Slower growth in taxable income combined with unemployment and decreased consumer confidence will cause downward pressure on revenues from personal and corporate income taxes and the Harmonized Sales Tax.
World prices for natural gas and oil declined steeply in 2008 and are forecast to remain low for quite some time. Combined with lower production volumes, this will have a significant negative impact on offshore royalty revenue.
Finally, revenues will be affected by the phasing out of the Large Corporations Tax.
The Province of Nova Scotia does not anticipate significant increases in revenues from federal sources in the coming years.
The Government of Canada amended the Equalization program again in the fall of 2008, reducing the overall amount available to receiving provinces. Nova Scotia’s equalization entitlement for 2009-2010 will stay the same as the previous year.
Transfers for health and social programs are also expected to grow at a rate that is much slower than rising costs.
Provinces will see the end of several federal trusts created in bill c-48. The federal government is also phasing out the Wait Times Reduction Fund. Nova Scotia has received additional funds from the Crown Share this year and last, but this payment is expected to be somewhat less in the coming year.
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