P.E.I. business got some bad news in the provincial budget Wednesday to balance out good news it got last year.

In the 2012 budget, business celebrated the announcement of HST coming to the Island.

But Finance Minister Wes Sheridan announced Wednesday he was increasing the tax on small business profits from 1.0 to 4.5 per cent. Sheridan said the change was being made as part of the introduction of harmonized sales tax.

"In part, the low rate helped to compensate the private sector for the absence of a harmonized tax," said Sheridan in his budget address.

Business will pay less sales tax under the HST, and therefore the compensation is no longer required, Sheridan argued.

Sheridan is projecting an extra $6.7 million in corporate income taxes. A portion of that would be from economic growth.

Gas prices going up

The introduction of the HST is going to have a big impact on P.E.I. gas prices.

Right now the full PST is not charged on gasoline. The full HST will be, but other taxes on gasoline will be adjusted resulting in an increase of about eight cents a litre on gas starting April 1. What the actual gas will be on that day can’t be predicted, because IRAC will also make an adjustment to the base price at the same time.

What can be said is that the days of Islanders consistently paying less for gasoline than is paid on the mainland are over. Sheridan said prices will likely be slightly higher than in much of the Maritimes.

Tobacco is in much the same situation as gas, with sales tax going up and other taxes being adjusted. Overall, cigarette prices are expected to go up $1 to $3 per carton of 200 cigarettes.