This year’s Federal Budget was delivered on Tuesday, February 11, 2014 and once again holds the line previously set by the Conservative Government.
While the recovery from the Great Recession of 2008 continues apace, with Canada leading the G-7 countries in growth-both in employment gains and real per-capita disposable income, continued pressure from other markets show that the recovery is still at some risk.
With that in mind, the government is committed to balancing the budget in a measured manner; by equipping Canadians with the skills and training they need to succeed in the labour market, while also connecting them to available jobs, supporting advanced research and innovation, investing in public infrastructure, reducing red tape and the regulatory burden faced by businesses, and encouraging trade and foreign investment to support our manufacturing sector and diversify our exports.
Minister of Finance Jim Flaherty tables the federal budget in the House of Commons on Parliament Hill in Ottawa on Tuesday, Feb. 11, 2014. (Fred Chartrand / THE CANADIAN PRESS)
Connecting Canadians With Available Jobs
The Government is taking further steps to ensure federal funding and programs are directed towards meeting labour market needs. The Government is also working to make it easier for Canadians to connect with available jobs, and to ensure that Canadians are given the first chance at those jobs.
The Canada Jobs Grant
Introduced last year, the Federal Government is now upgrading their contribution to up to $10,000, taking over the province’s portion of contributions.
Facilitating Opportunities for All Canadians
As we mentioned last year in our coverage of the 2013 budget, the Government was reforming the existing Labour Market Agreements previously due to expire in 2013. With Economic Action Plan 2014, the Federal Government is introducing a new generation of Labour Market Agreements for Persons with Disabilities, worth $222 million dollars annually over four years to be matched by the Territories and Provinces.
Additionally, they are providing an additional $40 million to the Canada Accelerator and Incubator Program to help entrepreneurs realize the potential of their ideas through intensive mentoring and other resources.
The Canada Apprentice Loan
The Government is creating the Canada Apprentice Loan by expanding the Canada Student Loans Program to help registered apprentices in Red Seal trades with the costs of training and introduces the Flexibility and Innovation in Apprenticeship Technical Training pilot project to expand the use of innovative approaches for apprentice technical training.
Fostering Job Creation, Innovation and Trade
In order to promote job creation, the Government has taken steps to increase Canada’s openness to trade and investment, provide tax relief, improve the regulatory environment, promote business competiveness and strengthen the financial sector. Economic Action Plan 2014 builds on this foundation by:
Automotive Innovation Fund
The automotive sector and its spinoffs represent a major portion of employment for the Canadian workforce. To bolster this, the government is providing an additional $500 million over two years to the Automotive Innovation Fund to support significant new strategic research and development projects and long-term investments in the Canadian automotive sector.
Responsible Resource Development, Conserving Canada’s Natural Heritage, and Investing in Infrastructure and Transportation
Among other initiatives, the government is providing $28 million over two years to the National Energy Board for comprehensive and timely reviews of project applications and to support the Participant Funding Program.
The government also proposes to make strategic investments in public infrastructure and transportation services across Canada, including in major bridges, small craft harbours and ports, and ferry services.
Supporting Families and Communities
Economic Action Plan 2014 builds on previous actions by the Government to support families and communities.
Having high-speed broadband connectivity to the Internet is quickly becoming a virtual necessity today. But outside of the major markets, its availability can be spotty as best, putting many Canadians at a serious disadvantage. To rectify this, the Economic Action Plan 2014 invests $305 million over five years to extend and enhance broadband internet service for Canadians in rural and Northern communities.
Economic Action Plan 2014 addresses other measures including the following:
Remittance Thresholds for Employer Source Deductions
The frequency of the remittance of source deductions by an employer depends on the employer’s total average monthly withholding amount in the two preceding calendar years.
The budget proposes to increase employer remittance thresholds as follows (for amounts to be withheld after 2014):
- For up to two required remittances per month, the threshold changes to $25,000 for average monthly withholdings (from $15,000), and;
- For up to four required remittances per month, the threshold changes to $100,000 for average monthly withholdings (from $50,000).
Consultation on Eligible Capital Property
The budget announces a public consultation on a proposal to repeal the eligible capital property (ECP) regime, replace it with a new capital cost allowance (CCA) class available to businesses, and transfer taxpayers’ existing cumulative eligible capital (CEC) pools to the new CCA class. Special rules to simplify the transition for small businesses will be considered as part of the consultation.
The proposed rules will include a new CCA class of depreciable property at a 100 per cent inclusion rate for eligible capital expenditures (versus the 75 per cent inclusion rate under the ECP regime) and a five per cent annual depreciation rate (versus the seven per cent under the ECP regime). The existing CCA rules (recapture, capital gains and depreciation) will generally apply.
IRA—CRA Exchange of Information for Tax Purposes
Under the Canada-U.S. agreement (signed on February 5, 2014), Canadian financial institutions will report to the CRA information in respect of U.S. persons. This information will be transmitted by the CRA to the IRS under the mechanism provided in the Canada-U.S. tax treaty and, consequently, will be subject to its confidentiality safeguards. Many registered accounts (RRSP’s, RRIF’s, TFSA’s, RESP’s, etc.) will be exempt from this reporting.
Meanwhile, the CRA will receive information from the U.S. in respect of Canadian resident taxpayers that hold accounts in U.S. financial institutions. This will assist Canadian tax authorities in enforcing compliance with Canadian tax laws.
Adoption Expense Tax Credit
The Adoption Expense Tax Credit (AETC) may be claimed for eligible adoption expenses in the taxation year in which an adoption is completed. The budget proposes to increase the maximum amount of eligible expenses for the AETC to $15,000 per child for 2014. The maximum amount will be indexed to inflation for taxation years after 2014.
Search and Rescue Volunteers Tax Credit
A Search and Rescue Volunteers Tax Credit (SRVTC) is now available to eligible ground, air and marine search and rescue volunteers. Eligible individuals for the SRVTC would be able to claim a 15 per cent non-refundable tax credit based on an amount of $3,000. The SRVTC will apply to the 2014 and subsequent taxation years.
The Canada Revenue Agency will automatically determine if an individual is eligible to receive the GST/HST Credit (and will eliminate the need for an individual to apply for the credit).
Trusts and Estates
The budget will generally proceed with the measures that were previously described in a 2013 consultation paper regarding the elimination of special tax benefits granted to testamentary trusts and grandfathered inter vivos trusts (i.e., certain inter vivos trusts created before June 18, 1971).
The budget proposes to apply flat top-rate taxation to grandfathered inter vivos trusts, trusts created by will, and certain estates. However, graduated tax rates will apply for the first 36 months of an estate that arises on and as a consequence of an individual’s death and that is a testamentary trust. Further, graduated tax rates will continue to be provided in respect of testamentary trusts that have individual beneficiaries who are eligible for the federal Disability Tax Credit.
As well, the budget proposes that testamentary trusts and grandfathered inter vivos trusts will no longer benefit from special treatment under a number of related tax rules including an exemption from the income tax installment rules and an exemption from the requirement that trusts have a calendar year-end.
Testamentary trusts that do not already have a calendar taxation year will have a deemed taxation year-end on December 31, 2015 (or in the case of an estate for which that 36-month period ends after 2015, the day on which that period ends).
While it is clear this year’s budget does not offer much in terms of tax savings for the consumer, it makes important steps towards bringing the government’s spending into balance and with it, financial security, while limiting the adverse impact on Canadian taxpayers.