It was a budget with not too many specifics, although large funding was promised for a variety of areas.
The budget left the major pillars of Canadian personal tax largely untouched. Important to note, there were no changes to the capital gain inclusion rate or individual taxes.
highlights of the budget include:
• Extension of pandemic business and income support measures, such as wage and rent subsidies, through September 2021.
• OAS for seniors aged 75 or older as of June 2022 will receive a one-time $500 special payment this August. OAS will also increase for pensioners 75 and older by 10% on an ongoing basis beginning July 2022.
• Introduced a personal luxury tax on cars and airplanes that cost more than $100,000 and on boats that cost more than $250,000. The tax is calculated at the lesser of 20% of the value above those thresholds or 10% of the full value.
• A new annual 1% tax on the value of residential real estate owned by non-Canadians if that property is considered to be vacant or underused as of January 2022.
Other updates:
• The government is considering increasing the minimum disbursement quota of 3.5% annually for charities and foundations - public consultations will be launched over the coming months.
• A proposal to create a nationwide childcare system that will bring childcare fees down to an average of $10 per day in regulated childcare centres by fiscal 2025-2026.
• Increasing the minimum hourly wage to $15 across Canada (increasing with inflation), except in provinces with a minimum wage north of that figure - Alberta’s current minimum hourly wage is already $15.
Where does this leave Canadians?
Cumulative deficits will add approximately $686 billion from 2020-2025 – a doubling of Canada’s debt load. Consider that —in just six years, the Canadian government will be tacking on as much debt to its balance sheet as it did in the prior 152 years combined!
With funding promising to spur Canada forward there was no mention of Foreign Direct Investment in Canada, which has contracted 40% since 2015.
Also, no measures to promote productivity or growth in the depleted private sector. No measures to revive the supply-side of the economy to help pay for this incredible spending experiment.
Taxes at some point will have to rise (and likely quite sharply) to pay for all of the social program spending, but this likely will await the outcome of the next election.
We hope you find this collection of information helpful. Not everything here will be relevant to you. If you would like to discuss further please give us a call or speak with your accountant about your personal tax situation.
P.S. Something that we have spoken about at prior Outlooks and in Insights… Big Tech is finally being targeted by governments around the world for taxes associated with revenues from their countries. The Canadian Government announced it is imposing a digital services tax on foreign tech giants of 3% on revenues from companies that sell data and content to Canadians. This category would include Amazon, Netflix, Google and Facebook, as well as Uber and Airbnb, should they meet minimum revenue criteria.