Description: Canada’s oil producing provinces are facing pressures on their finances with decreasing royalty revenues. This past week, the Province of Newfoundland and Labrador released its budget for 2016-17, showing an increase in a range of taxes and fees. This included an increase in the Harmonized Sales Tax as well as a special deficit reduction levy of up to $900 on high income earners. Despite this levy, the province is still forecasting a deficit of up to $2 billion. The government is blaming the previous administration for the tough times, arguing that not enough was done to secure the future when royalties were flowing in more liberally.
Date: April 14, 2016
1) Are you from Newfoundland and Labrador? If so, how will you and your family be impacted by this budget, considering as well the reduction in funding for Memorial University?
2) If you were an accountant advising the government would you have chosen this approach to the downturn in revenues?
3) How do you think the financial statements of the province should account for the special deficit reduction levy?