Canada province Saskatchewan hikes sales tax, sees smaller deficit

WINNIPEG, Manitoba (Reuters) - The western Canadian province of Saskatchewan forecast on Wednesday a much smaller, C$685 million ($513.5 million) deficit for the next fiscal year, 2017/18, as resource revenues look to rise and it boosts the provincial sales tax.

The projected deficit follows a forecast C$1.3 billion deficit for the current 2016/17 fiscal year, which ends March 31.

Slumping prices for crude oil and potash, due to global oversupply, have hit the province’s treasury hard during the past three years. Resource revenues are forecast to rise 10 percent from last year, but remain at low historic levels.

“Our challenge is clear. We need to move away from our level of reliance on resource revenues,” Finance Minister Kevin Doherty said in a statement.

Premier Brad Wall’s right-leaning Sask Party government plans to spend C$14.8 billion, down 1.2 percent year over year, on revenue of C$14.165 billion, up 3.4 percent, in Canada’s biggest wheat-growing province. The total deficit also factors in other adjustments, such as contingencies.

Doherty predicted a smaller, C$304 million deficit for 2018/19, and a return to surplus the following year.

Saskatchewan will on March 23 bump its provincial sales tax to 6 percent from 5 percent, and charge it on more items, including children’s clothing, construction services and some equipment used in the resource sector.

Saskatchewan, home to potash fertilizer mines owned by Potash Corp of Saskatchewan POT.TO, Mosaic Co MOS.N and Agrium Inc AGU.TO, forecast an average 2017 price for the crop nutrient of $175.74 per tonne, up slightly from $171.87 last year.

It expects the price of West Texas Intermediate oil in 2017 to average $55 per barrel, up from $43.40 per barrel in 2016.

The government said it will increase oversight of its oil and gas industry, including hiring more inspectors. The move follows an oil leak last year from a Husky Energy Inc HSE.TO pipeline into a major Saskatchewan river that cut off the drinking water supply for two cities.

Saskatchewan, population 1.1 million, expects total public debt to climb to C$18.2 billion, up C$2.1 billion, by March 31, 2018.

Neighboring Alberta, a bigger oil producer, forecast last week a higher-than-expected budget deficit of C$10.3 billion in the coming fiscal year.

Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Chizu Nomiyama