2009 Budgets

2009 Federal Budget Big Spending, Little Tax Relief Federal Minister of Finance Jim Flaherty presented the minority government's budget on January 27, 2009, against the backdrop of a deepening global economic crisis. The stated goals of Budget 2009 – Canada's Economic Action Plan are to stimulate economic growth, support Canadians and invest in Canada's long-term growth. Contact Local Contacts »

Read PwC's full budget commentary Download PDF Read PwC's budget highlights Download PDF

Our Instant Reactions to the Federal Budget

• 6:15 p.m. EST: Small businesses struggling in the downturn get growth support: Budget 2009 provides for certain measures to enable small businesses to manage through the downturn. They include:

  • Increasing the amount of small business income eligible for the reduced federal tax rate of 11 per cent to $500,000 from the current limit of $400,000 as of January 1, 2009
  • Increasing access to credit for small businesses through proposed amendments to the Canada Small Business Financing Program and the Business Development Bank of Canada
  • Providing $30 million over two years for the Canada Business Network and $10 million to the Canadian Youth Business Foundation
  • Allocating $200 million over two years to the National Research Council's Industrial Research Assistance Program to enable it to temporarily expand its initiatives for small and medium-sized businesses

  The decisions that small companies make now will determine how they are positioned when the cycle turns. Companies need to be agile enough to take advantage of the downturn's opportunities and the provisions from the Budget – and be among the strong survivors in the long run.

• 6:10 p.m. EST: Eligibility for the mineral exploration tax credit extended one year: Budget 2009 puts forth a one-year extension of the temporary 15% mineral exploration tax credit helping Canada's important mining sector manage through the downturn.

  The temporary credit can help companies raise capital for mining exploration by providing an incentive to individuals who invest in flow-through shares issued to finance exploration.

  Further, through the one-year "look-back" rule, funds raised with the benefit of the credit in 2010, for example, can be spent on eligible exploration activity until the end of 2011.

  The estimated net cost of this extension will be $55 million over the next two fiscal years.

• 6:05 p.m. EST: Tariffs eliminated on a range of machinery and equipment: Budget 2009 proposes to permanently eliminate tariffs on a range of machinery and equipment. This measure will lower costs for Canadian producers in a variety of sectors, such as forestry, energy and food processing, which must purchase specialized equipment from overseas to modernize their operations and enhance competitiveness. A much needed relief for these industries.

  This measure will affect close to $2 billion in annual imports of machinery and equipment and provide over $440 million in savings for Canadian industry over the next five years.

  Budget 2009 will also take steps to facilitate the movement of goods by improving the Customs Tariff rules respecting the treatment of temporarily imported cargo containers, and undertake consultations with respect to further liberalizing the use of these containers in Canada.

• 6:00 p.m. EST: $170 million short term support for forest industry: The forest products industry is currently facing challenges that include weak markets, increasing competition, proposed climate change requirements, volatility of exchange rates, and increasing energy, transportation, and fibre costs, all of which have resulted in fundamental changes in industry infrastructure and numerous mill closures.

  Budget 2009 provides a total of $170 million over two years for the following measures to help companies develop new products and processes, and take action on new opportunities in the international market place.

  Budget 2009 also provides $80 million over two years to Natural Resources Canada for the Transformative Technologies program administered by FPInnovations. An additional $40 million will be provided to Natural Resources Canada in 2010–11 to develop pilot-scale demonstration projects of new products that can be used in commercial applications.

  The Budget also provides Natural Resources Canada with $40 million over two years for the Canada Wood, Value to Wood, and North America Wood first programs to help forestry companies market innovative products internationally.

  A further $10 million will be provided to Natural Resources Canada in 2009–10 to support large-scale demonstrations of Canadian-style use of wood for construction in targeted off-shore markets, and non-traditional uses of wood in domestic markets.

• 5:55 p.m. EST: Certain measures for a greener Canada: The details of greenhouse gas (GHG) emissions regulation and trading schemes will have a significant impact on business, and several issues are likely to present considerable challenges moving forward. Budget 2009 provided for certain measures to make Canada more environmentally sound.

  Measures included:

  • $1 billion for green infrastructure projects
  • $1 billion over two years for renovation and energy retrofits to social housing
  • $300 million over two years to the ecoENERGY Retrofit program
  • $1 billion for clean energy research, development and demonstration projects
  • $87 million over two years for key Arctic research facilities
  • $245 million over two years for the cleanup of federal contaminated sites
  • $10 million to improve government environmental reporting

  The current political landscape in North America demonstrates significant climate change policy activity occurring at both the federal and provincial/state levels. These policies will have a significant impact on the future of environmental regulation, as climate change remains one of the top societal, economic and political concerns of the 21st century.

  According to scientific consensus, the effects of climate change will continue to grow and mitigation and adaptation measures will eventually need to be implemented.

• 5:50 p.m. EST: Personal tax breaks but no rainy day funds: Lower income earners, parents and seniors got some relief today with Budget 2009 including:

  • An increase in the basic personal amount that all Canadians can earn without paying federal income tax
  • A raise to the upper limit of the two lowest personal income tax brackets by 7.5%
  • An increase to the amount that low- and middle-income families can earn before their federal child benefits are phased out
  • An investment of $580 million to effectively double the tax relief provided by the Working Income Tax Benefit
  • A tax savings of up to $150 a year for seniors by increasing the Age Credit amount by $1,000

  However, missing from the Budget was a temporary relaxation of RRSP withdrawal rules as proposed by PwC in their pre-Budget submission to the Minister of Finance allowing for Canadians to access a “rainy day” fund for emergency measures to manage through the downturn. Full details on PwC’s submission can be found at www.pwc.com/ca/cnts.

• 5:45 p.m. EST: Get the shovels at the ready, $12 billion dollars in new infrastructure stimulus over the next two years: There were multiple actions announced today in Budget 2009 for immediate infrastructure spending. While not unexpected, the stimuli are intended to create jobs in the construction, engineering and manufacturing sectors along with economic spin-off activity hopefully leading to safer, greener and more modern infrastructure.

  "The creation of the Infrastructure Stimulus Fund, together with the PPP Fund which was established last year, sets the stage for the second generation of Canadian infrastructure projects,” says Shamshad Madhok, Managing Director and recently appointed head of PwC's federal government Infrastructure and Project Finance practice. “Selecting the right projects will be critical to driving value and economic growth."

  Highlights from the Budget include:

  • $1 billion over five years for a green infrastructure fund
  • Up to $500 million over the next two years to accelerate infrastructure projects in small communities
  • $1 billion over two years to expedite new “ready-to-go” provincial, territorial and municipal projects
  • $4 billion over two years to restore aging infrastructure
  • $500 million over two years to Recreational Infrastructure Canada (RInC) to build and renew community recreational facilities
  • $2 billion for repair, maintenance and construction of post-secondary institutions
  • $750 million to the Canada Foundation for Innovation to support leading-edge research infrastructure
  • $50 million to the Institute for Quantum Computing for a new research facility
  
  

• 4:45 p.m. EST: Possible boost of Canada’s productivity through faster adoption of newer technology; temporary 100% CCA rate for computer hardware and systems software: The capital cost allowance (CCA) system determines how much of the cost of a capital asset a business may deduct each year for tax purposes. Budget 2009 proposes a temporary 100% CCA rate for computer hardware and systems software acquired after January 27, 2009 and before February 1, 2011.

  In addition, the rule that restricts CCA deductions to one-half of the CCA write-off otherwise available in the first year will not apply to these computers. This temporary measure will allow taxpayers to fully expense their investment in computers in one year. It is estimated that this measure will cost $340 million in 2009-10 and $355 million in 2010-11.

  To compete, Canadians must focus on high value, business centric solutions and use of agile development techniques. This budget measure could assist Canada’s productivity through the faster adoption of newer technology. Businesses in all sectors of the economy, including the service sector, could benefit from this incentive.

• 4:32 p.m. EST: Time to renovate! If you were planning on adding an addition to your house or sprucing up the backyard, 2009 will be the year to do so. Budget 2009 provides up to $7.8 billion for housing construction and renovation, including a temporary Home Renovation Tax Credit of up to $1,350 for eligible home renovations and alterations. For instance:

  • Renovating a kitchen, bathroom, or basement
  • New carpet or hardwood floors
  • Building an addition, deck, fence or retaining wall
  • A new furnace or water heater
  • Painting the interior or exterior of a house
  • Resurfacing a driveway
  • Laying new sod

  Home buyers will also get an increase to the Home Buyers’ Plan withdrawal limit to $25,000 from $20,000. Also there is a new First-Time Home Buyers’ Tax Credit that will provide up to $750 in tax relief when purchasing a first home.

• 4:27 p.m. EST: $200 billion in existing and new measures to support financing for Canadians and Canadian business: Access to $200 billion of additional financing is now going to become available through an Extraordinary Financing Framework to improve the access to financing and to strengthen the financial system – a much needed addition to the borrowing capacity of Canadians and Canadian businesses to manage through the downturn. Certain measures under the Extraordinary Financing Framework include:

  • An additional $50 billion for the Insured Mortgage Purchase Program, increasing its size to $125 billion
  • $13 billion to increase the lending of Crown corporations, of which $5 billion will be delivered through the new Business Credit Availability Program
  • $12 billion for a Canadian Secured Credit Facility to support financing of vehicles and equipment
  • An increase in the loan limit for small businesses under the Canada Small Business Financing Program.The current limit, which has not changed in the past 15 years, will be raised from$250,000 to $350,000 and to $500,000 for loans made for acquiring real property
  
  

• 4:22 p.m. EST: Stimulus, safeguard and competitive advantage: Individuals and businesses are clearly worried about their futures; however the direct action announced today by the Federal Government is geared toward stimulating recovery and creating sustainable growth in Canada. Over the next two years, Canada’s Economic Action Plan will provide over $40 billion in stimulus. Notable actions include:

  • Improved access to financing for consumers and businesses with support of up to $200 billion of additional financing
  • Reduction of taxes for Canadians by more than $20 billion over 2008–09 and the following five years
  • Almost $12 billion in new infrastructure funding and $7.8 billion to build and renovate housing
  • Enhanced benefits and training opportunities for Canadians
  • The creation or maintenance of up to 190,000 jobs for Canadians by the end of 2010.
  • To provide total stimulus equal to 1.9% of GDP this year

  Key to the budget this year is the combined stimulus across many areas to help Canada and Canadians manage through the downturn. Missing though, were any significant corporate tax measures that would balance the liquidity of the corporate tax sector.

2009 British Columbia Budget Update -- Tax Highlights On Tuesday, September 1, 2009, the BC Minister of Finance, the Honourable Colin Hansen, introduced the province’s September Budget Update 2009. According to the Minister, the global economic downturn has continued at a rapid pace since the February 17, 2009 budget’s delivery, resulting in a downgrade in the consensus economic forecast for BC. Contact Local Contacts »

Read PwC's budget update highlights (09-01-09) Download PDF Read PwC's budget highlights (02-01-09) Download PDF

2009 Québec Budget Full Commentary Monique Jérome-Forget, Québec Minister of Finance, delivered Québec's 2009/2010 budget on March 19, 2009. While the recession has hit the province's economy, the government intends to continue to limit the effects of the crisis and facilitate recovery. Contact Local Contacts »

Read PwC's full budget commentary Download PDF Read PwC's budget highlights

2009 Saskatchewan Budget Full Commentary On Wednesday, March 18, 2009, Saskatchewan's Minister of Finance, Rod Gantefoer, presented the province's 2009 budget. PwC's budget analysis discusses these and other tax changes. Contact Local Contacts »

Read PwC's budget highlights Download PDF

2009 Manitoba Budget Highlights On Wednesday, March 25, 2009, Manitoba’s Minister of Finance, Greg Selinger, presented the province’s 2009 budget. The budget proposes to reduce Manitoba’s small business rate to nil on December 1, 2010, make the Research and Development Tax Credit fully refundable after 2009 for corporations that work with qualifying Manitoba-based research institutes on new technologies and lowers the mining tax rate. PwC's budget analysis discusses these and other tax changes. Contact

Read PwC's budget highlights Download PDF

2009 Ontario Budget Harmony in Sales Tax and Cuts in Corporate Tax On Thursday, March 26, 2009, Ontario's Minister of Finance, Dwight Duncan, presented the province's 2009 budget. As expected, the budget introduces a blended sales tax rate of 13% on July 1, 2010. The budget also includes other significant tax changes. Contact Local Contacts »

Read PwC's full budget commentary Download PDF