N.S. projected deficit reduced to $525M

Nova Scotia's finance minister says the provincial deficit for this fiscal year will be smaller than he anticipated in his September budget.

Graham Steele said the deficit for 2009-10 is projected to be $525.2 million, which is $66.9 million lower than what was projected nearly three months ago.

Steele said the improvement is mainly due to increases in personal income tax and tobacco tax. The total tax revenue is now forecast to be $8.5 billion, which is $78.8 million more than budgeted.

But the large deficit means the province is still actively considering raising the harmonized sales tax by two percentage points, Steele said.

"According to Revenue Canada, the earliest date on which an HST increase could be implemented would be July 1, 2010," Steele said.

"No decision has been made by this government about whether to raise the HST or if so, by how much. If we did raise it, that would be the earliest opportunity."

Steele estimated that a two per cent increase in HST would yield an additional $350 million a year for the province.

The tax increase was one of several recommendations made by a panel of economic experts in November on how Nova Scotia should deal with its financial situation.

A province-wide tour is planned for the new year to consult taxpayers on what combination of tax hikes and program cuts would be least painful.

Liberal finance critic Leo Glavine said the NDP government might be setting people up for an even bigger tax bite.

"The cautionary note here is Nova Scotia raising it by two per cent, and the federal government, when they take a look, they're going to be quick to review the GST and so we could have a double hit on taxation in Nova Scotia," he said.