With a renewed commitment to balancing the books by 2015, Finance Minister Jim Flaherty presented a federal budget focused on jobs and infrastructure, with little new spending and no income tax breaks.
There were no changes to Canada‘s retirement income system, aside from a vague promise to work with the provinces and pension plan sponsors to promote low cost and secure pension options.
“In uncertain global economic times, the most important contribution a government can make to bolster confidence and growth in a country is to maintain a sound fiscal position,” Flaherty said in his budget speech. “Every Canadian knows that when expenses outstrip income, the future of the whole family is at risk.”
On the job front, Ottawa is introducing the Canada Job Grant, which will provide up to $15,000 per person for job training. Ottawa will contribute up to $5,000, with employers and the provinces expected to kick in matching grants. The grants could benefit as many as 130,000 Canadians a year, Ottawa says, with skills training provided in community colleges, career colleges, polytechnics and union training centres.
The main big ticket item in the budget is the updated Building Canada Plan, which contains more than $47 billion in new spending over 10 years, including $32.2 billion on community improvement, $14 billion on new infrastructure projects and $1.25 billion on public-private partnerships.
For consumers, Ottawa is cutting tariffs on items such as baby clothing and hockey equipment, measures the government says will provide $76 million in relief, reducing the gap between retail prices in Canada and the United States.
For small business owners, the Lifetime Capital Gains Exemption will be increased to $800,000 and indexed to inflation after 2014. The budget also proposes changes to the dividend tax credit system for business owners.
For businesses, Ottawa is providing tax relief for the manufacturing sector through a two-year extension of the accelerated capital cost allowance for machinery and equipment. For example, a manufacturer that purchases an eligible machine for $10,000 is able to deduct $2,500 in the first taxation year, $5,000 in the second taxation year and the remaining $2,500 in the third taxation year.
There‘s also a new Donor Super Credit for charitable donations, complementing the existing Charitable Donations Tax Credit with an additional 25% credit for first time donors on up to $1,000 of donations. Ottawa is enhancing the Adoption Expense Tax Credit, a 15% credit that allows adoptive parents to claim eligible adoption expenses.
The government says it will support efforts by the provinces to appropriately regulate payday loan lenders, and will raise awareness that government cheques can be cashed free of charge at any bank.
On the investment front, Ottawa is moving to phase out the 15% federal tax credit for labour-sponsored venture capital corporations, noting that critics have complained the credit is ineffective in its stated goal of boosting the venture capital sector. The change means that labour-sponsored mutual funds will effectively disappear when the credit is eliminated in 2017.
In an effort to improve the fairness of the country‘s tax system, Ottawa is introducing a number of minor amendments to address aggressive tax planning and clarify tax rules.
“New measures to close tax loopholes will help ensure everyone pays their fair share,” Flaherty said.
The Canada Revenue Agency will be given new tools to enforce tax rules, with a specific focus on international tax evasion. Ottawa says closing tax loopholes will result in savings of more than $300 million in 2013-14.
More on the Canadian economy:
- Are you paying more tax than you need to?
- Your province’s budget is about to get interesting
- Are Canadians in too much debt or not?
- Unretirement and the Canada Pension Plan
- Here’s what youth unemployment is costing us
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