Federal and Provincial Budgets

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To help you with your tax planning and keep you informed on Canada’s financial health, our team of tax professionals will offer helpful commentary on issues related to this year’s federal and provincial budgets. As governments table their budgets, PwC will bring immediate detailed analysis to you below.

 

  • Federal
  • British Columbia
  • Manitoba
  • Ontario
  • Quebec

2010 Federal Budget

Federal Minister of Finance Jim Flaherty presented the minority government’s budget on March 4, 2010. The budget does not change corporate or personal taxes. PwC will provide a full commentary later this evening.
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PwC's Full Budget Commentary

PwC's budget highlights

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PwC Tax Services leader Saul Plener (right) and Canadian National Tax Services leader Nick Pantaleo weigh the proposed changes to Canada's tax system and their implications on businesses.
Our Instant Reactions to the Federal Budget
  • 5:35 p.m. EST: Tax filing consolidation still possible, as Federal Government considers it: While the Government has taken several steps to improve the competitiveness of the tax system for Canadian businesses, there are still specific structural elements of the tax system where it may be possible to make improvements.
    Going forward, the Government will explore whether new rules for the taxation of corporate groups – such as the introduction of a formal system of loss transfers or consolidated reporting – could improve the functioning of the tax system. Stakeholder views will be sought prior to the introduction of many changes.
  • 5:30 p.m. EST: Forestry industry receives $100 million in support over next four years: The Forestry sector in Canada represents an important economic industry in many regions, but faces a number of challenges in terms of competition and structural changes within this sector. On the heels of the support through the Economic Action Plan, the Government is taking additional action to build by establishing the Next Generation Renewable Power Initiative with $100 million of support over the next four years for the development, commercialization and implementation of advanced clean energy technologies in the forestry sector.
    Managed by Natural Resources Canada, the Government believes this will help create a more sustainable forestry sector while contributing to Canada’s Global leadership as a clean energy producer.
  • 5:25 p.m. EST: Mineral Exploration Tax Credit extended for another year: Promoting the exploration and development of Canada’s rich mineral resources offers important benefits in terms of employment, investment and infrastructure, especially for rural communities. The continuation of the temporary 15% Mineral Exploration Tax Credit (METC) is intended to help companies raise capital for mining exploration by providing an incentive to individuals who invest in flow-through shares issued to finance exploration.
    Budget 2010 proposes to extend the METC for an additional year, to March 31, 2011.
  • 5:20 p.m. EST: Employment Insurance premium rate is frozen – good news for Canadian businesses and employees: The Federal Government let Canadian businesses and employees know today that it is freezing the Employment Insurance premium rate at $1.73 per $100 of insurable earnings to the end of 2010 – the lowest rate since 1982 – in order to leave more money in the hands of employers and employees. This will mean good news for Canadian businesses and employees, who were expecting these rates to increase.
  • 5:15 p.m. EST: Small and medium sized businesses can benefit from new Government innovation and technology program: Innovation by small businesses is an important part of the Canadian economy, employing 5 million people roughly half of the Canadian workforce. These companies generally lack capital to promote their innovative technologies. As a result, the Federal Government brought forward new actions to support this group, including a Small and Medium-sized Enterprise Innovation Commercialization Program, a two year pilot of to adopt new technologies for commercial enhancement.
  • 5:12 p.m. EST: Budget encourages fairness, closes tax loopholes: New initiatives announced today in Budget 2010 are intended to protect the integrity of the tax system. By closing loopholes in the tax system, the Federal Government intends to ensure all taxpayers pay their fair share of tax on income earned in Canada and abroad. Also, initiatives in the budget will strengthen the capacity of the Canada Revenue Agency to address aggressive tax planning and compliance risks with the potential to erode the tax base, and to fight against tax evasion.

    Notable actions include:
    • Tightening of tax rules on stock options to eliminate tax reduction arrangements.
    • Consultation for a new reporting regime for aggressive tax avoidance transactions.
    • New rules to counter schemes often referred to as “foreign tax credit generators” that are designed to shelter tax otherwise payable.
    • Ensure that income trust conversions into corporations are subject to the same loss utilization rules that currently apply to similar transactions involving only corporations.
    • Limitations to tax ability of cosmetic medical expenses.

  • 5:07 p.m. EST: Federal Government moves ahead to establish Canadian securities regulator for financial sector: As Canada’s strong financial sector is a key component of its ongoing economic recovery, new measures were introduced today in an effort by the Government to help support the nation’s competitive industry, these included:

    • Ongoing commitment to establish a Canadian securities regulator within the next three years.
    • Moving ahead with a Code of Conduct for the Credit and Debit Card Industry in Canada.
    • Introduction of a legislative framework to enable credit unions to incorporate and continue federally, in an effort to promote the continued growth and competitiveness of the sector and enhance financial stability.

  • 5:05 p.m. EST: New ‘green’ initiatives help promote clean energy investments and technologies: Budget 2010 introduced certain measures today to drive Canada’s position as an energy leader through encouragement of investment in energy projects and clean energy generation. The budget also includes measures to preserve Canada’s natural heritage through environmental protection in the North and further protection of the Great Lakes.

    Notable actions include:

    • Establishing the Next Generation Renewable Power Initiative, with $100 million over the next four years to support the development, commercialization and implementation of advanced clean energy technologies in the forestry sector.
    • Modernizing the regulatory system for project reviews, and supporting consultation with Aboriginal peoples on major resource projects.
    • A 50% declining balance capital cost allowance for green energy including heat recovery and distribution systems and other clean energy generation assets.
  • 4:55 p.m. EST: Measures to help Canada compete will aid the economic recovery: Investment and trade initiatives mean reduced costs for manufacturers

    Today, certain measures were announced to help Canadian manufacturers reduce costs associated with the import of machinery, equipment and goods. There will be no more fast write-offs for general manufacturing equipment, which had been hoped for by the industry.

    The notable action included:
    • Making Canada a tariff free zone for industrial manufacturers by eliminating all remaining tariffs on machinery and equipment and goods imported for further manufacturing – a savings of $300 million in annual duty for Canadian business, to support investment and growth and create jobs.

  • 4:50 p.m. EST: Measures to help Canada compete will aid the economic recovery: The Federal Budget announced today delivered new measures that are geared to improving Canada’s financial position and competitiveness globally. Notable actions include:

    • The lowest overall income tax rate on new business investment in the G7 (25% by 2012)
    • Making Canada a tariff free zone for industrial manufacturers by eliminating all remaining tariffs on machinery and equipment and goods imported for further manufacturing - a savings of $300 million in annual duty for Canadian business.
    • Improvements to Canada's system of international taxation to facilitate investment, cut red tape, and streamline the compliance process associated with the taxation of cross-border activity.
    • Establishing a new Red Tape Reduction Commission.
    • Enhancing the quality of the financial services sector.

    These measures are designed to encourage local and new foreign investments in Canada.

  • 4:40 p.m. EST: Recalibration of government spending key to achieving a balanced budget Budget 2010 sets the stage for deficit reduction in the future while completing the Stimulus Program is the current focus. Budget 2010 includes savings measures of $17.6 billion over the next five years. These savings stem from restraining growth in National Defence Spending and International Assistance Envelope while containing the administrative cost of Government.

    Cost containment will be achieved through a comprehensive review of government administrative functions and overhead costs in order to identify opportunities for additional savings and improve service delivery. The focus of which will be in three key areas: 1) increasing efficiency and effectiveness, 2) focusing on core roles and 3) meeting the priorities of Canadians.

    Roxanne Anderson, Lead Partner of Federal Government of Canada Services states:

    “Modernizing the manner in which the Government operates and delivers service will be critical to the Government being able to meet its savings objectives outlined in Budget 2010.

    Debate will continue about the right mix of revenue enhancing actions versus spending reducing options – the end result should be a sustainable deficit reduction plan to restructure costs without sacrificing the quality of services that Canadians value.”

  • 4:25 p.m. EST: Staying the course – continued stimulus, job creation and focus on a balanced budget The actions announced today by the Federal Government in Year 2 of Canada’s Economic Action Plan aim to stay the course of economic recovery with a budget geared towards the continuation of the stimulus package, job creation and balancing the budget. Improving Canada’s international competitive position will assist the economic recovery.
    Notable actions include:

    • Continuation of the stimulus package: $19 billion in new federal stimulus to create and maintain jobs; temporary measures will be wound down as planned.
    • Reduced barriers for businesses: making Canada a tariff-free zone for manufacturers – a savings of $300 million to Canadian business.
    • Other key measures include: encouraging investments in energy projects and clean energy generation, further strengthening of the financial sector by moving forward toward a Canadian securities regulator and reducing red tape and compliance costs for Canadian businesses.
    • Spending restraint through targeted measures: a proposal of $17.6 billion in savings over five years.
    • Review of government overhead administrative functions and overhead costs.
    • Extension of the Mineral Exploration and Tax Credit (METC) to March 31, 2011.
    • Launch of a new Small and Medium-Sized Enterprise Innovation Commercialization Program with $40 million over two years.
    The budget continues with the promised changes of reduction to corporate and personal tax rates. The Federal Government will not raise taxes and will not cut major transfers to persons and other levels of government.

2010 British Columbia Budget

Tax Highlights

On Tuesday, March 2, 2010, the British Columbia Minister of Finance, the Honourable Colin Hansen, introduced the province’s 2010 budget. According to the Minister, the province’s economy shows signs of recovery from the unprecedented global economic turmoil that has affected it since 2008. As a result, the B.C. government is projecting a steady reduction in the fiscal deficit in 2010 and beyond, with a return to a balanced budget by the 2013/14 fiscal year. The budget has an estimated deficit of $1,715 million for 2010/11, $945 million for 2011/12, and $145 million in 2012/2013. These projections are based on economic growth forecasts of 2.2% for 2010, 2.3% for 2011, and 2.8% for the following three years.
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PwC's budget highlights


2010 Manitoba Budget

Tax Highlights

On Tuesday, March 23, 2010, Manitoba’s Minister of Finance, Rosann Wowchuk, presented the province’s 2010 budget. The budget makes Manitoba’s Research and Development Tax Credit partially refundable for in-house R&D expenses, and extends and enhances the Film and Video Production Tax Credit and Interactive Digital Media Tax Credit. It also extends the Fitness Tax Credit to individuals aged 16 to 24 and introduces a 5% advance for the Tuition Fee Income Tax Rebate. These and other key measures are discussed below.
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PwC's budget highlights


2010 Ontario Budget

Not Much New

On Thursday, March 25, 2010, Ontario’s Minister of Finance, Dwight Duncan, presented the province’s 2010 budget. The budget does not change personal income tax rates or previously announced corporate income tax rate reductions. It confirms that a federally administered harmonized sales tax (HST) will replace the retail sales tax on July 1, 2010, and provides additional rules to ease the transition. Few other tax measures are included.
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PwC's Full Budget Commentary


2010 Quebec Budget

“The budget I am tabling today lays the groundwork for Québec’s future, while enabling us to meet our immediate challenges. Today, the government is making decisive choices and proposing sustainable solutions,” declared Finance Minister Raymond Bachand. Read our commentary.
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PwC's Full Budget Commentary

PwC's budget highlights