There was plenty of speculation prior to the release of the 2017 Federal Budget regarding the topics it would address. The wait is now over with its release on Wednesday, March 22. The $21 billion deficit headline figure is a little less than last year’s $25 billion deficit, but it remains way above the $10 billion limit the Liberals promised in their 2015 federal election campaign. So far, there has been no official word on when they expect to balance the budget.
The Liberal Government’s overarching theme for this year’s budget is “Building a Strong Middle Class” and a number of mandates and measures concentrating on infrastructure, competitiveness, trade and economic development have been outlined.
Our objective is to provide a summary of what the key changes mean to you, the business owner, from our perspective. Although we’re optimistic regarding the mandates and the direction of the Liberal Government based on the positive investments made in this budget, we have two key areas of concern:
The big-picture fiscal direction and the lack of concern regarding the economic deficits without a clear path to a balanced budget, and;
The lack of consideration and protection for the Canadian economy with regard to the uncertain outlook for US monetary and fiscal policy. Read more on this in our “Trump Effect” post.
Tax Loopholes & Business Competitiveness:
$523 million has been committed over five years to improve tax compliance and bring attention to tax evasion. Streamlining of the tax system is always welcomed by us, yet it is important that businesses should not be penalized in the attempt to curtail tax shelters. In addition, we feel that a reduction in red tape and regulatory burden on businesses should also go alongside improved tax compliance, but it was not included in this year’s budget.
With a lot of speculation surrounding the capital gains tax in the period leading up to the budget announcement, we’re pleased to note that the rules remain unchanged with 50% of a capital gain considered taxable income.
The government is supporting Canadian entrepreneurs through venture capital by offering $400 million over three years through the Business Development Bank of Canada. In addition, the budget provides support for six high-tech growth sectors poised for innovation – manufacturing, agri-food, clean tech, digital industries, clean resources, health and bio-sciences – by way of a $950 million investment over five years.
We feel these are positive steps highlighting the government’s support for long-term economic development to ensure Canadian entrepreneurs and innovation remain Canadian.
Infrastructure & Transportation:
The cancellation of the public transit tax credit is concerning as it will increase the cost of transit for some users by up to $600 per year. This seems to be the price that the middle class has to pay for the government’s massive infrastructure spending plan.
Although clarity on federal infrastructure spending is needed to enhance Canada’s housing strategy, many feel that such significant spending may reduce market confidence.
Equality, Family Life & Talent:
There’s a lot to like about the focus on gender equality, improvement of family life and talent development.
For business, the government’s focus on international talent attraction and opening access to the Temporary Foreign Worker Program is necessary to ensure Canada remains globally competitive. The government’s support for increasing the participation of women in the workforce over the next decade by improving access to affordable child care and the provision of more financial support to those caring for an ill or aging relative are also promising developments for workforce revitalization.
The 2017 Federal Budget fell a bit flat in comparison to the earlier speculation about potential changes – both positive and negative – that the Liberal Government might be considering. To instill business confidence for the benefit of Canada’s long-term economic growth, we hope the government will place a greater focus on fiscal prudence going forward.
For forward thinking tax planning and business advice that meet your objectives, connect with Fiona Zheng, CPA, CGA – Tax Specialist, at firstname.lastname@example.org or +1 (905) 731-8977.
For the Top 10 Federal Budget Highlights, click here to read The Globe and Mail’s summary.