The Saskatchewan government is raising the PST rate by one point as it tries to pare down a projected $685-million deficit.
The provincial budget tabled Wednesday includes a PST increase from five to six per cent, effective Thursday. The measure is expected to increase revenue by $242 million this fiscal year.
"We need the revenue," Saskatchewan Finance Minister Kevin Doherty said of the PST increase.
"All the changes that we're making with respect to the shift from tax on income and productivity to consumption taxes is based on our government's intention to get off such a heavy reliance on resource revenues.
"I acknowledge it will put some pressure on families."
PST will now apply to purchases such as children’s clothing, restaurant meals and snack foods, insurance premiums and construction services.
Several PST exemptions are also being eliminated, starting April 1. There will no longer be an exemption for bulk gasoline purchases, and the exemption for buying diesel fuel in bulk is being reduced to 80 per cent of purchases.
The exemption for used cars will continue, but the value of a trade-in will no longer be deductible when calculating the PST on the purchase of a new vehicle.
It’s anticipated the measures will add $900 million in tax revenue. To help soften the blow of the changes, the annual Saskatchewan Low-Income Tax Credit will be increased by $100 per adult and $40 per child.
The government says the changes are largely offset by the positive economic impact of personal income tax reductions, increased operating spending and investment in infrastructure.
“Every Saskatchewan taxpayer at every income level will see a decrease in their income taxes,” Doherty said.
“Those whose income is too low to pay income tax will see an increase in the Saskatchewan Low-Income Tax Credit they receive.”
According to the government, the PST increases would amount to $711 annually for a family of four earning $100,000, while the income tax reductions would total $2,662. A single person earning $40,000 would pay $130 more in PST annually, while income tax cuts would total $879.
With files from The Canadian Press