POLITICS

P.E.I. Budget 2015: Tobacco Tax Hike Takes Effect Midnight

06/19/2015 10:24 EDT | Updated 06/19/2016 05:59 EDT
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A man smokes a Japan Tobacco Inc. Mevius brand cigarette in an arranged photograph in Tokyo, Japan, on Wednesday, Feb. 4, 2015. Japan Tobacco, the maker of Mevius, Winston and Camel cigarettes, is expected to announce its third quarter earnings on Feb. 5. Photographer: Yuriko Nakao/Bloomberg via Getty Images
CHARLOTTETOWN - The Prince Edward Island government has tabled a $1.7 billion budget that hikes taxes on cigarettes while spending more on health care.

Finance Minister Allen Roach says his fiscal plan for 2015-16 is a "reality budget" that will help the province live within its means.

The budget includes a projected deficit of $19.9 million and forecasts a balanced budget in 2016-17.

Nearly half of the budget will be devoted to health care, and about $2 million in revenue will come from increased taxes on tobacco and cigarettes.

"The public told us, 'We don't want to see big cuts in health care or big cuts in education. We want you to be reasonable in how you approach this'," Roach said.

"This budget addresses issues without making it awkward or cumbersome to the public."

Roach said the government is focused on increasing exports and growing the population.

Darlene Compton, the finance critic for the Opposition Progressive Conservatives said that for a government that campaigned on change, the budget is very similar to others previously tabled by the Liberals.

"This budget continues the tradition of this government to chip away at the disposable income of Islanders through hikes to fees, licenses and taxes," Compton said.

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MAJOR BUDGET THEMES:

Roach says the budget builds on the Island's strong primary industries like farming, fishing and aquaculture, supporting innovation in those sectors while also supporting the development of new industries.

He said the government is working to be more efficient and will reduce the size of the public service through attrition.

"We're not eliminating any positions in this budget. What we're doing is we're looking at those who are retiring and looking at how we can re-engineer those jobs to continue to do the work that was done there," Roach said.

Roach said there are no targets for the number of jobs the government would like to cut.

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KEY SPENDING

Health care represents 40 per cent of the 2015-16 budget, including such initiatives as the P.E.I. Generic Drug Program, which will launch in October.

Roach says it will cap payments at less than $20 and save Islanders $2 million in drug costs in 2015-16.

The budget also includes an additional $500,000 for enhanced home care for the elderly and doubles the budget for breakfast programs in schools.

Funding for UPEI and Holland College will increase by $1 million, and $1.4 million will be spent on a new program to help prevent food tampering.

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TAX CHANGES:

The tax on a carton of 200 cigarettes will increase by $5 and the tax on 200 grams of fine tobacco will rise by $8 as of midnight, generating another $2 million in revenue annually.

The budget also enshrines recently-announced changes to the Income Tax Act that adjust the levels of basic credits and the threshold at which Islanders can keep their full credit amounts.

As a result 12,000 Islanders will have their taxes reduced by hundreds of dollars and 2,300 Islanders will no longer be required to pay Provincial Income Tax. Government revenues will be reduced by $1.7 million.

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FINANCIAL PROJECTIONS:

The deficit for 2014-15 is now forecast at $34.7 million, down $5 million from the budget forecast.

The 2015-16 budget increases the net debt by $28.7 million to nearly $2.18 billion by the end of March 2016 - about $15,000 for every Islander.

The budget projects a 1.4 per cent increase in revenues from budget 2014-15 and a 0.5 per cent increase in program expenditures.

Roach also told the legislature the unemployment rate is expected to fall below double digits in 2016 for the first time in 38 years.