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BILL NO. 7





Government Bill




5th Session, 56th General Assembly
Nova Scotia
46 Elizabeth II, 1997




An Act Respecting

Certain Financial Measures





The Honourable William Gillis
Minister of Finance




Halifax
Printed by Queen s Printer for Nova Scotia



Explanatory Notes

Clause 1 sets out the short title of the Act.

Clauses 2 and 3 extend the equity tax credit from December 31, 1997, to December 31, 2001.

Clause 4 clarifies that all operating costs shall be taken into consideration when determining whether the expenditures for a fiscal year exceed the amount of revenue for that year.

Clause 5 repeals the reduction from 59.5 to 57.5 in the rate of personal income tax as a percentage of the federal rate. This reduction was to be effective July 1, 1997. The new reduction in the personal income tax rate, which will result in the same net rate to the taxpayer, is contained in Clause 7.

Clause 6 makes a consequential change that is necessary as a result of the change in Clause 8.

Clause 7 reduces the rate of personal income tax as a percentage of the federal rate from 59.5 to 58.5 effective January 1, 1997, and further reduces the rate from 58.5 to 57.5 effective January 1, 1998.

Clause 8 provides for a tax on the capital of a large corporation.

Clause 9 provides for a manufacturing and processing investment tax credit.

Clause 10 requires annual amounts to be paid by Nova Scotia Power Incorporated, commencing June 1, 1998, to offset additional expenditures incurred by municipalities as a result of the harmonization of the federal and provincial sales taxes.

Clause 11 requires the Public Accounts to be tabled in the House of Assembly not later than December 31 of the calendar year in which the fiscal year to which the Public Accounts relate ends.

Clause 12 requires the Minister to pay at least one half of net gas royalties received from the offshore into the Public Debt Retirement Fund.

Clause 13 excludes acting pay from the definition of "salary".

Clauses 14 and 15 permit a trade-in credit on the sale of motor vehicles or designated tangible personal property, provided tax is paid in the first instance. At present, the Act prohibits trade-in credits.

Clause 16 makes the selling price of cigars price neutral as a result of the harmonization of the federal and provincial sales taxes.

Clause 17 decreases the tax on tobacco, effective April 1, 1997, to correspond with the harmonization of the federal and provincial sales taxes.

Clause 18 provides that where the Provincial Tax Commissioner commences an audit during the period April 1, 1997, to March 31, 2001, the Commissioner may consider a period of time up to four years prior to April 1, 1997.


An Act Respecting

Certain Financial Measures


Be it enacted by the Governor and Assembly as follows:

1 This Act may be cited as the Financial Measures (1997) Act.

PART I

EQUITY TAX CREDIT ACT

2 Section 2 of Chapter 3 of the Acts of 1993, the Equity Tax Credit Act, as amended by Chapter 2 of the Acts of 1995, is further amended by

(a) striking out "1997" in the fifth line of subclause (h)(i) and substituting "2001";

(b) striking out "1997" in the third line of subclause (h)(ii) and substituting "2001"; and

(c) striking out "1997" in the fourth line of clause (j) and substituting "2001".

3 Clause 6(1)(a) of Chapter 3 is amended by striking out "1997" in the fifth line and substituting "2001".

PART II

EXPENDITURE CONTROL ACT

4 Sections 12 and 13 of Chapter 4 of the Acts of 1993, the Expenditure Control Act, are repealed and the following Sections substituted:

12 (1) In each and every fiscal year of the Province commencing with the 1996-97 fiscal year, the amount appropriated by the Legislature for net program expenditures and the net debt servicing costs as defined in the budgetary summary of the annual Estimates of the Province shall not exceed the amount of revenue estimated by the Minister for that fiscal year.

(2) Notwithstanding subsection (1), an amount may be expended in a fiscal year for net program expenditures and net debt servicing costs that is no more than one per cent more than the amount appropriated by the Legislature for net program expenditures and forecast to be spent on net debt servicing costs.

(3) Where net program expenditures and net debt servicing costs for a fiscal year exceed revenue for that year, the resulting deficit shall be recovered no later than the end of the second fiscal year following the fiscal year in which the deficit occurred by a reduction in expenditures or an increase in revenue, or both, over that period.

(4) Where the amount of revenue received or to be received by the Minister in a fiscal year exceeds the amount appropriated by the Legislature for net program expenditures and the net debt servicing costs for that year, the resulting surplus shall, after accounting for any recoveries required pursuant to subsection (3) and any additional expenditures referred to in subsection (2) or Section 13, be used to reduce the public debt of the Province or reduce taxes, or both.

13 Where net program expenditures and net debt servicing costs for a fiscal year exceed the amount authorized to be spent pursuant to Section 12, the expenditures in excess of the amount authorized by subsections 12(1) and (2) may only be made after a resolution has been passed by the House of Assembly authorizing the expenditure.

PART III

FINANCIAL MEASURES (1996) ACT

5 Section 15 of Chapter 5 of the Acts of 1996, the Financial Measures (1996) Act, is repealed.

PART IV

INCOME TAX ACT

6 Subsection 2(8) of Chapter 217 of the Revised Statutes, 1989, the Income Tax Act, as amended by Chapter 26 of the Acts of 1993, is further amended by

(a) adding "except for the purpose of Part IA of this Act," immediately before "where" in the first line of clause (b); and

(b) adding "except for the purpose of Part IA of this Act," immediately before "where" in the first line of clause (e).

7 (1) Subsection 4(5) of Chapter 217, as amended by Chapter 10 of the Acts of 1990, is further amended by striking out "59.5" in the last line and substituting "58.5".

(2) Subsection (1) has effect on and after January 1, 1997.

(3) Subsection 4(5) of Chapter 217, as amended by subsection (1) of this Section, is further amended by striking out "58.5" in the last line and substituting "57.5".

(4) Subsection (3) has effect on and after January 1, 1998.

8 Chapter 217 is further amended by adding immediately after Section 32 the following headings and Sections:

PART IA

TAX ON LARGE CORPORATIONS

32A In this Part,

(a) "financial institution" means a corporation as defined in Section 2 of the Corporation Capital Tax Act and, for greater certainty, does not include an insurance company;

(b) "long-term debt" has the same meaning as in subsection 181(1) of the Federal Act;

(c) "reserves" has the same meaning as in subsection 181(1) of the Federal Act.

32B Subsections 181(3) and (4) of the Federal Act apply for the purpose of this Part.

32C (1) Every corporation that has a permanent establishment in the Province in a taxation year ending after March 31, 1997, shall pay a tax under this Part for the taxation year equal to

(a) where the aggregate of the corporation's taxable capital employed in Canada, as determined under subsection (4), and the taxable capital of all associated corporations, as determined under subsection (2), is less that ten million dollars, 0.5% of that capital; or

(b) where the aggregate of the corporation's taxable capital employed in Canada, as determined under subsection (4), and the taxable capital of all associated corporations, as determined under subsection (2), is ten million dollars or more, 0.25% of that capital.

(2) The taxable capital employed in the Province by a corporation for a taxation year is equal to

(a) where the corporation has no permanent establishment situated outside the Province, the difference between its taxable capital employed in Canada for the year under subsection (4) and its capital deduction for the year under Section 32D; or

(b) where the corporation has a permanent establishment situated outside the Province, that proportion determined under subsection (3) of the difference between its taxable capital employed in Canada for the year under subsection (4) and its capital deduction for the year under Section 32D.

(3) The proportion referred to in clause (2)(b) shall be determined in accordance with sections 400 to 413 of the Federal Regulations.

(4) Sections 181.2 and 181.4 of the Federal Act apply for the purpose of this Part.

(5) Where a taxation year of a corporation is less than fifty-one weeks, the amount determined under subsection (1) for the year in respect of the corporation shall be reduced to that proportion of that amount that the number of days in the year is of three hundred and sixty-five.

(6) Where a taxation year of a corporation ends after April 1, 1997, the amount determined under subsection (1) for the year in respect of the corporation shall be reduced to that proportion of that amount that the number of days in the year after April 1, 1997, is of the number of days in the taxation year.

(7) Where a taxation year of a corporation ends after April 1, 2002, the amount determined under subsection (1) for the year in respect of the corporation shall be reduced to that proportion of that amount that the number of days in the year prior to April 1, 2002, is of the number of days in the taxation year.

32D (1) The capital deduction of a corporation for a taxation year is

(a) where the corporation's taxable capital employed in Canada for the year, as determined under subsection 32C(4), is less than ten million dollars, five million dollars unless the corporation was related to another corporation in the year, in which case, subject to subsection (4), its capital deduction for the year is nil; or

(b) in any other case, nil.

(2) A corporation that is associated to any other corporation in a taxation year of the corporation ending in a calendar year may file with the Minister in the prescribed form an agreement on behalf of the related group of which the corporation is a member under which an amount that does not exceed five million dollars is allocated among all corporations that are members of the related group for each taxation year of each such corporation ending in the calendar year and whose combined taxable capital employed in Canada as defined in subsection 32C(2) is less than ten million dollars and at a time when it was a member of the related group.

(3) The Minister may request a corporation that is related to any other corporation at the end of a taxation year to file with the Minister an agreement referred to in subsection (2) and, if the corporation does not file such an agreement within thirty days after the request, the Minister may allocate an amount among the members of the related group of which the corporation is a member for the year not exceeding five million dollars.

(4) Subsections 181.5(4) to (7) of the Federal Act apply for the purpose of this Part.

(5) In this Section, a corporation is "related" to another corporation or is a member of a "related group" within the meaning assigned to those expressions by section 251 of the Federal Act.

(6) In this Section, one corporation is "associated" with another in a taxation year within the meaning assigned to that word by section 256 of the Federal Act.

32E No tax is payable under this Part for a taxation year by a corporation included in subsection 181.1(3) of the Federal Act or by a corporation that is a financial institution.

32F Every corporation that is liable to pay tax under this Part for a taxation year shall file with the Minister not later than the day on or before which the corporation is required by Section 8 to file its return of income, a return of capital for the year in the prescribed form containing an estimate of the tax payable under this Part by it for the year.

32G Sections 152, 158 and 159, subsection 161(11), sections 162 to 167 and division J of Part I of the Federal Act apply to this Part.

32H The Governor in Council may make regulations that are deemed necessary or advisable to carry out effectively the intent and purpose of this Part.

32I This Part applies to taxation years ending after March 31, 1997, and for taxation years beginning before April 1, 2002.

9 Chapter 217 is further amended by adding immediately after Section 13F the following heading and Section:

DIVISION FF - MANUFACTURING AND PROCESSING INVESTMENT TAX CREDIT

13G (1) In this Section,

(a) "investment tax credit" of a corporation at the end of a taxation year means the amount, if any, by which the total of

(i) an amount equal to thirty per cent of the total of all amounts each of which is the capital cost to the corporation of a qualified property acquired by it in the year, determined with reference to subsection 13(7.1) of the Federal Act,

(ii) an amount equal to thirty per cent of the total of all amounts each of which is the capital cost to the corporation of a qualified property acquired by it in any of the seven taxation years immediately preceding or the three taxation years immediately following the year, determined with reference to subsection 13(7.1) of the Federal Act,

(iii) an amount equal to the total of all amounts each of which is an amount required by subsection (3), (4) or (5) to be added in computing its investment tax credit at the end of the year, and

(iv) the total of all amounts each of which is an amount required by subsection (3), (4) or (5) to be added in computing its investment tax credit at the end of any of the seven taxation years immediately preceding or the three taxation years immediately following the year,

exceeds

(v) the total of all amounts each of which is that portion of the amount deducted pursuant to subsection (2) from the tax otherwise payable under this Act by the corporation for a preceding taxation year that is in respect of property acquired in the year or in the seven taxation years immediately preceding or the two taxation years immediately following the year;

(b) "manufacturing or processing" has the meaning assigned by paragraph 125.1(3) of the Federal Act and includes qualified activities as defined by federal regulations made for the purpose of paragraph 125.1(3) of the Federal Act;

(c) "qualified property" of a corporation means property acquired by the corporation after December 31, 1996, and before January 1, 2003, that is qualified property within the meaning assigned by the definition under subsections 127(9), (11) and (11.1) of the Federal Act, that has not been used, or acquired for use or lease, for any purpose whatever before it was acquired by the corporation and that is

(i) to be used by the corporation in the Province primarily for the purpose of manufacturing or processing of goods for sale or lease, or

(ii) to be leased by the corporation by a lessee, other than a person exempt from tax under section 149 of the Federal Act, who can reasonably be expected to use the property in the Province primarily for the purpose of manufacturing or processing of goods for sale or lease, but this subclause does not apply in respect of property that is machinery and equipment unless the property is leased by the corporation in the ordinary course of carrying on a business in the Province and the principal business of the corporation is manufacturing property that it sells or leases.

(2) There may be deducted from the tax otherwise payable pursuant to this Act by a corporation for a taxation year an amount not exceeding the lesser of

(a) the corporation's investment tax credit at the end of the year; and

(b) the tax otherwise payable by the corporation pursuant to this Act for the year.

(3) Where, in a particular taxation year of a corporation that is a beneficiary under a trust, an amount would, if the trust were a taxpayer, be determined in respect of the trust under subclause (1)(i) or (iii) for its taxation year ending in that particular taxation year, the portion of that amount that may, having regard to all circumstances, including the terms and conditions of the trust, reasonably be considered to be the corporation's share thereof is the amount required to be added in computing the investment tax credit of the corporation at the end of that particular taxation year.

(4) Where, in a particular taxation year of a corporation that is a member of a partnership, an amount would, if the partnership were a taxpayer, be determined in respect of the partnership under subclause (1)(i) or (iii) for its taxation year ending in that particular taxation year, the portion of that amount that may reasonably be considered to be the corporation's share thereof is the amount required to be added in computing the investment tax credit of the corporation at the end of that particular taxation year.

(5) Where, in a particular taxation year of a corporation that is a member of a limited partnership, an amount would, if the limited partnership were a taxpayer, be determined in respect of the limited partnership under subclause (l)(i) or (iii) for its taxation year ending in that particular taxation year, the portion of that amount that may reasonably be considered to be the corporation's share thereof, determined with reference to subsection 127(8.1) of the Federal Act, is the amount required to be added in computing the investment tax credit of the corporation at the end of that particular taxation year.

(6) Where, after December 31, 1996, there has been an amalgamation within the meaning of subsection 87(1) of the Federal Act and one or more of the predecessor corporations had an investment tax credit for any taxation year any portion of which was not deducted by the predecessor corporation in computing its tax otherwise payable under this Act for any taxation year, for the purpose of computing the new corporation's investment tax credit at the end of any taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, each such predecessor corporation.

(7) Where, after December 31, 1996, there has been a winding-up to which subsection 88(1) of the Federal Act applies and the subsidiary had an investment tax credit for any taxation year any portion of which was not deducted by the subsidiary in computing its tax otherwise payable under this Act for any taxation year, and with reference to clause 88(1)(e.3) of the Federal Act, for the purpose of computing the parent's investment tax credit at the end of any particular taxation year ending after the subsidiary was wound up, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary.

(8) Subsections 127(9.1) and (9.2) of the Federal Act apply for the purpose of this Section.

PART V

NOVA SCOTIA POWER PRIVATIZATION ACT

10 (1) Chapter 8 of the Acts of 1992, the Nova Scotia Power Privatization Act, is amended by adding immediately after Section 18 the following Section:

18A (1) Commencing June 1, 1998, the following amounts shall be paid by the Company to the Minister:

(a) two million dollars on June 1, 1998;

(b) four million dollars on June 1, 1999;

(c) six million dollars on June 1, 2000;

(d) eight million dollars on June 1, 2001;

(e) ten million dollars on June 1, 2002;

(f) ten million dollars on June 1, 2003;

(g) ten million dollars on June 1, 2004; and

(h) ten million dollars on June 1, 2005, and each and every June 1st thereafter.

(2) The Minister shall distribute the amounts received pursuant to clauses (1)(a) to (g) among the municipalities in the manner determined by the Minister so as to ensure that the amounts referred to in those clauses are paid to the municipalities on or before March 31, 2005.

(3) Commencing June 1, 2005, the annual ten million dollar amount referred to in clause 1(h) shall be paid by the Company to the municipalities in the manner determined by the Minister.

(4) On or before March 31, 2000, the Minister shall conduct a review of the actual expenditures incurred by municipalities as a result of the Sales Tax Act from April 1, 1997, to the date of the review.

(5) In this Section, "municipality" means a municipality as defined in the Municipal Affairs Act.

(2) Subsection (1) comes into force on such day as the Governor in Council orders and declares by proclamation.

PART VI

PROVINCIAL FINANCE ACT

11 Section 10 of Chapter 365 of the Revised Statutes, 1989, the Provincial Finance Act, is repealed and the following Section substituted:

10 The Minister shall lay the Public Accounts before the House of Assembly not later than December 31st of the calendar year in which the fiscal year to which the Public Accounts relate ends or, if the House of Assembly is not sitting, the Minister shall file the Public Accounts with the Clerk of the House of Assembly.

12 Chapter 365 is further amended by adding immediately after Section 60A the following Section:

60B (1) In this Section, "net gas royalties" means the amount of gas royalties received from the Sable Offshore Energy Project in a fiscal year minus the reduction in equalization payments received from the Government of Canada in respect of that year as a result of the receipt of the gas royalties.

(2) The Minister shall pay into the Public Debt Retirement Fund no less than one half of the net gas royalties received in a fiscal year.

PART VII

PUBLIC SERVICE SUPERANNUATION ACT

13 Clause 2(j) of Chapter 377 of the Revised Statutes, 1989, the Public Service Superannuation Act, is amended by adding "acting pay and" immediately after "include" in the third line.

PART VIII

REVENUE ACT

14 Subsection 18(2) of Chapter 17 is repealed.

15 Section 21 of Chapter 17 is amended by

(a) striking out "located in the Province" in the first and second lines; and

(b) striking out "and the tax, if applicable, has been paid on such tangible personal property accepted in trade," in the fourth and fifth lines.

16 Subclause 32(f)(i) of Chapter 17 is repealed and the following subclause substituted:

(i) customs duties and excise tax imposed by or pursuant to an enactment of the Parliament of Canada and including an amount equal to seven-fifteenths of the tax that would be paid or payable under Part IX of the Excise Tax Act (Canada) if that tax were calculated only on the preceding elements of this clause, determined without reference to the input tax credit provided for in that Part that would relate to the thing covered by the contract of sale, 17 (1) Subsection 34(1) of Chapter 17, as amended by Chapter 21 of the Acts of 1996, is further amended by

(a) striking out "five and twenty-nine" in the first line of clause (a) and substituting "four and twenty-two";

(b) striking out "four and seventeen" in the first line of clause (b) and substituting "three and thirty-five";

(c) repealing clause (c) and substituting the following clause:

(c) three and forty one hundreds cents per stick of tobacco for tobacco in the form of pre-proportioned tobacco sticks;

(d) striking out "sixty-six" in the first line of clause (d) and substituting "fifty-six"; and

(e) striking out "eighty-eight" in the first line of clause (e) and substituting "one'.

(2) Subsection (1) has effect on and after April 1, 1997.

18 Section 78 of Chapter 17 is amended by adding immediately after subsection (10) the following subsection:

(11) Notwithstanding subsection (10), in making an assessment pursuant to this Section for tangible personal property as defined in Part II of this Act during the period April 1, 1997, to March 31, 2001, inclusive, the Commissioner shall not consider a period or periods of time greater than four years prior to April 1, 1997, unless the Commissioner deems the person did not exercise the degree of care, diligence and skill to prevent an offence that a reasonably prudent person would exercise in comparable circumstances, or if there is evidence that the person has committed fraud, and the results may be applied over the period or any part of the period.


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