On Wednesday, March 22, 2017, the Federal government announced the 2017-2018 budget. Certainly you have heard some of the highlights in the media. As a valued client of the Wealth Stewards group, we wish to summarize the most important changes that may affect your family and your business.
Bill Morneau, Federal Minister of Finance, titled the budget “Building a Strong Middle Class”. He previously stated,
“Canadians are talented, skilled and creative people. Our plan will give them the tools and support they need to make their mark in the economy of tomorrow, while ensuring that the success we create together is shared by the middle class, and those working hard to join it”
Overall the stated themes of the budget are:
The 2017-2018 budget proposed another deficit of $28.5 billion, up from $27.8 billion, with no plan to balance the budget going forward. Projected future deficits instead were centered on maintaining a debt-to-GDP ratio of 31%, a drastic change from last year when the government projected the 2020 deficit to be $14.2 billion. The 2018 forecast includes $3 billion of a new risk contingency, and $1.4 billion in additional revenue, offset by $1.1 billion in increased program expenses.
Source: Department of Finance, Federal Budget, 2017
Nothing in the budget is going to materially move the needle for global markets, Canada’s credit rating, nor economists views of short term and long term growth. This was a placeholder budget. The risk contingency is to account for three key pieces of information not yet available.
1) What will the U.S. tax system be?
2) What will U.S. trade policies be?
3) What was the impact of the announced spending measures from last year?
As I stated in my review of the 2016 Federal budget, which becomes more apparent now, we remain to expect further tax increases in the coming years.
Review of the Tax System:
Despite much discussion of economists and tax professionals in the media the past few weeks, there were no significant changes to the Income Tax Act. Notably, there were no changes to:
The government stated it is continuing to review tax planning strategies of high income earners and private corporations that it views inappropriately reduce personal taxes. The finance minister made it very clear in his speech that the government remains committed to eliminate tax planning strategies that solely benefit “wealthy” Canadians.
Finance stated that it will be releasing a paper in the next few months regarding these issues, along with policies to respond to their stance.
The government reaffirmed its’ stance to institute a federal carbon tax of $10/tonne in 2018, increasing to $50/tonne by 2022, for provinces that do not adopt their own carbon tax system.
This is a high level summary of the budget announcements that may have an effect on your family. As always, if you wish to discuss any of the 2017 Federal Budget matters in more detail, do not hesitate to call us at (905) 891-6052 or email email@example.com.
- Andrew Brydon, CPA, CA