The Federal Government’s 2018 Budget touts Canada’s strong economic growth over the past two years, including real GDP growth of 3.2 per cent since the second quarter of 2016, an unemployment rate of 5.9 per cent, and significant improvements in average weekly earnings, consumer confidence, and household consumption. The Finance Minister expects similar growth in the near-term. In addition, federal revenues increased by more than 11 per cent in 2017, largely from personal and corporate income taxes.
With this positive economic activity and outlook, the government has presented an “Equality and Growth,” budget that includes tens of billions of dollars in new or increased spending over the next six years, with the goal of further growing government revenues by increasing economic participation among women, visible minority Canadians and persons with disabilities, as well as substantial long-term investments in science and technology.
The government suggests that increasing equality for women and enhancing women’s participation in the workplace (especially in technology and trades) could add $150 billion to the Canadian economy over the next decade.
Highlights include:

• Reducing the small business tax rate to 10 per cent effective January 1, 2018 and 9 per cent as of January 1, 2019
• Additional reporting requirements for trusts (effective 2021 tax year)
• Extending eligibility for accelerated capital cost allowance for certain clean energy equipment
• Enhancing and renaming the Working Income Tax Benefit (starting 2019)
• Annual indexation of the Canada Child Benefit (starting July 1, 2018)
• “Use it or lose it” EI parental benefits (expected availability June 2019)
• Reducing access to the small business tax rate for businesses with high passive investment income (expected to apply 2019)
• Applying GST/HST to management and administrative services provided
• to an investment limited partnership by the general partner (after September 8, 2017)
• Additional new measures to prevent tax avoidance
• Adjusting tobacco excise duty rates annually (starting April 1, 2019)
• Grants and funds to attract women to “Red Seal” trades and construction (starting 2018–19)
• Pre-apprenticeship assistance for underrepresented groups (starting 2018–19)

The Finance Minister has not set a timeline for balancing the budget, but has substantially reduced the projected annual deficits through 2022–23 and expects the net debt-to-GDP ratio to decline over the period as well. The previously projected deficit for 2017–18 was $28.5 billion and now sits at $19.4 billion. Similarly, the projected deficit for 2021–22 was $18.8 billion and has been revised down to $13.8 billion. The net debt-to-GDP ratio is currently 31 per cent and is projected to decline to 28.4 per cent by 2022–23.

Please click on the document below for further details!
tps_overview_of_canada_federal_budget_2018.pdf

The Federal Government’s 2017–18 Budget gives Canadians a taste of what they might expect over the next couple of years: attempted efficiencies, closed tax loopholes, steady deficits, and a touch of caution. Budget 2017 outlines only $200 million in net new spending, but also an increase to the deficit of more than $5 billion for 2017–18, partly due to commitments from the previous budget, reduced revenues and increased general expenses.

The projected deficit for 2017–18 is $28.5 billion, declining to $18.8 billion by 2021–22 (including an annual $3 billion contingency fund). However, if the government’s strong growth scenario plays out, we could see a much smaller deficit between $5 and $8 billion by 2021. Instead of planning to eliminate the deficit as previously proposed, the government says it will maintain a balanced net debt-to-GDP ratio of around 31 per cent over the next five years.

There are no changes to corporate or personal income tax rates or the small business deduction threshold and no changes to capital gains taxation. In addition, the government did not address in the Budget a number of tax issues it has discussed since Budget 2016, indicating it will release more details on its plans to limit tax-planning strategies later this year. Concerns over potential changes to taxes, trade agreements and regulations in the United States have no doubt caused Canada’s Federal Government to reconsider its own tax strategy.

The Budget proposes to address a range of tax loopholes and inefficiencies, including: eliminating billed-basis accounting for certain professionals, preventing tax avoidance through straddle transactions, eliminating the tax deduction for home relocation loans, applying tax-avoidance rules to Registered Education Savings Plans (RESPs) and Registered Disability Savings Plans (RDSPs), eliminating the additional deduction for gifts of medicine, preventing Canadian life insurers from using foreign branches to avoid tax, repealing the tax exemption for insurers of farming and fishing property, and eliminating the Public Transit Tax Credit.

In order to advance the twin goals of reducing tax evasion and improving compliance, the government plans to give the Canada Revenue Agency an additional $523.9 million over the next five years. The government anticipates a five-fold return on its investment, hoping the CRA will recover $2.5 billion for its efforts.

We can expect to see more substantial proposals for change as the year progresses. The government has clearly signaled that it will be looking for additional ways to prevent tax avoidance.

Please click the link below for some detailed specifics on the announcements:
federal_budget_commentary_2017_final.pdf