2007 Prince Edward Island Budget Impact Paper

This paper was prepared by the Compensation Sector, Accounting, Banking and Compensation Branch, Public Works and Government Services Canada (PWGSC). It should be noted that this document is not all encompassing. Employees may find this document informative from a personal perspective.

The following items, which are relative to the compensation product, were introduced in the Prince Edward Island budget speech that was presented by the Honourable Mitch Murphy, Provincial Treasurer and Chair of the Treasury for the Government of Prince Edward Island, on April 10, 2007.

ITEMS AFFECTING PWGSC COMPENSATION SYSTEMS

Personal Income Tax

The lowest tax bracket threshold will be increased from $30,754 to $31,369 effective January 1, 2007 and to $31,984 effective January 1, 2008.

The middle tax bracket threshold will be increased from $61,509 to $62,739 effective January 1, 2007 and to $63,969 effective January 1, 2008.

The highest tax bracket threshold will be increased from over $61,509 to over $62,739 effective January 1, 2007 and to over $63,969 effective January 1, 2008.

Impact: PWGSC compensation systems will be programmed to reflect the changes for 2007 in July 2007. It is expected that the Canada Revenue Agency (CRA) will provide employers with the adjusted tax bracket thresholds, which will take into consideration the first six months of 2007, by June 2007.

Basic Personal Amount

The basic personal amount will be increased from $7,412 to $7,560 effective January 1, 2007 and to $7,708 effective January 1, 2008.

Spousal and Eligible Dependent Amount

The maximum spousal amount will be increased from $6,294 to $6,420 effective January 1, 2007 and to $6,546 effective January 1, 2008.

Age Amount

The age amount will be increased from $3,619 to $3,691 effective January 1, 2007 and to $3,764 effective January 1, 2008.

Impact: PWGSC compensation systems will be programmed to reflect the changes to the basic personal amount, spousal amount and the age amount for 2007 in July 2007. It is expected that the CRA will provide employers with the adjusted tax credit amounts, which will take into consideration the first six months of 2007, by June 2007.

ITEMS OF INTEREST

Tuition and Education Amounts

The personal education tax credit amounts will double from $200 to $400 for full-time students and from $60 to $120 for part-time students effective for the 2007 taxation year.

Impact: This change will be incorporated into the 2007 income tax return.

Surtax Threshold

The high-income surtax threshold has been increased from $5,200 of provincial tax in 2006 to $8,850 for 2007 and further to $12,500 for 2008 so that middle-income families will no longer pay the surtax.

Impact: This change will be incorporated into the 2007 income tax return.

Pension Income Splitting

Effective January 1, 2007, the government of Prince Edward Island will parallel the federal government's pension income splitting measure.

Impact: This change will be incorporated into the 2007 income tax return.

To review the 2007 Prince Edward Island budget documents, please visit this site:

http://www.gov.pe.ca/budget/2007/index.php