The budget tabled by federal Finance Minister Bill Morneau on February 27, 2018 starts by confirming the continuation of annual federal deficits, with no return to a balanced budget in the near future. The Minister justifies this policy by pointing to the ratio of federal debt to gross domestic product (GDP), which, at 30%, remains well within the government’s target window.
While this use of deficit spending mirrors what we saw in the last two budgets, a number of other measures are worthy of note since they are likely to have a more direct impact on our personal finances.
1. To begin with, one of the budget’s stated central goals is to promote male-female equality, notably through the creation of pay-equity legislation that will apply to federally regulated employers with 10 employees or more. The government will soon be entering into consultations on this issue. As well, the government affirmed that gender-based analysis was applied to the entire budget process to ensure respect for the principles of equity throughout. A variety of other measures also reflect this commitment.
2. In a similar vein, the budget announced the creation of a Parental Sharing Benefit to be offered as an additional benefit when both parents agree to share parental leave. This new benefit will be available to eligible two-parent families, including adoptive and same-sex couples. Effective date: July 2019. Note that this draws inspiration from equivalent measures already offered in Quebec. The same goes for the future national pharmacare plan, for which the creation of an advisory committee was announced.
3. On the other hand, the budget contains no tax increases or decreases, other than the announcement of a new excise tax on cigarettes – $1.00 for a carton of 200 cigarettes – and a future excise tax on cannabis of $1 a gram or 10% of the selling price, whichever is more.
4. Some news of interest to investors and people who own income properties or second homes: contrary to persistent rumours, the capital gains inclusion rate will remain at 50%, which means that only half of a capital gain is taxable. In the past, the inclusion rate has been as high as 66 2/3%, and even 75%.
5. Speaking of taxes, if you own a small or medium sized business, you might have been expecting the budget to clarify the tax reform introduced in 2017. In this regard, the budget confirms the implementation of an exemption on the first $50,000 of passive investment income, but also a gradual reduction in the small business deduction for businesses with over $50,000 of passive income. Important measures were also announced affecting the tax treatment of business income with respect to the payment of dividends. All of these provisions, which are a revised version of the changes first announced in July 2017, will come into force for the taxation year beginning after 2018. That gives you time to talk to your financial security advisor, since these matters can be very complex.
6. By the way, if you have set up a trust as part of your estate or tax planning, you might want to note that the government plans to introduce new reporting requirements starting in 2021.
7. If you work in the knowledge economy, and more specifically in an area associated with research and innovation, the government is committed to investing an extra $3.8 billion in this sector over the next five years.
8. Do you work for the federal public service? Have you experienced problems with the Phoenix pay system? There may be light at the end of the tunnel: the government has set aside $453 million to improve, or even replace, this system.
9. If you are part of an Indigenous community, the government is planning to invest $4.8 billion over the next five years to improve living standards and promote self-determination for these communities. In the area of employment, more specifically, $447 million is earmarked for a Skills and Employment Training Program for Indigenous people.
10. Finally, a quick mention of some other measures that might interest you if you operate in one of these sectors: a $1.3 billion investment in nature conservation, the creation of a million-dollar Nature Fund, an additional investment of $2 billion over five years in international aid, and $508 million invested over five years in a National Cyber Security Strategy. And if you work in print media, you might want to know about the $50 million in support announced for this sector, again over five years.
The following sources were used to prepare this article:
Department of Finance Canada, Budget 2018, February 27, 2018; TheGlobeandMail.com, Federal budget highlights: Twelve things you need to know, February 27, 2018; ici.Radio-Canada.com, spécial - budget du Canada, February 27, 2018; lapresse.ca, spécial - budget du Canada, February 27, 2018; Finance et investissement, spécial - budget du Canada, February 27, 2018; les Affaires, Les données du budget visualisées, February 27, 2018; PWC, 2018 Federal Budget Analysis, February 27, 2018.