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.

Provincial budgets dates

British Columbia

February 21

Alberta

February 9

Saskatchewan

March 21

Manitoba

April 17

Ontario

March 27

Quebec

March 20

New Brunswick

March 27

Nova Scotia

April 3

Prince Edward Island

April 18

Newfoundland and Labrador

April 24

Federal

2012 Federal Budget

On March 29, 2012, the Federal Minister of Finance, Jim Flaherty, presented the majority government’s budget. The budget does not change corporate or personal tax rates. This Tax memo discusses the tax initiatives proposed in the budget.
 

Our Instant Reactions: Tax and Other Highlights

  • Gov’t will eliminate 12,000 jobs over 3 years, total workforce reduction to be about 19,200
  • OAS eligibility rises from 65 to 67, won’t affect those currently receiving benefits and people aged 54 and over as of March 31 2012
    Starting on April 1, 2023 the age of eligibility for OAS and GIS will be gradually increased from 65 to 67, with full implementation by January 2029.
  • SR&ED stays intact, except capital expenses no longer eligible and rate drops to 15%
    Changes to the SR&ED program not as broad as expected, proposals include:
    Simplify the program by removing capital from the expenditure base; Two design improvements that affect the calculation of overhead expenditures and of arm’s length contract payments.
    Budget 2012 includes a reduction in the general SR&ED tax credit rate from 20% to 15%; There will be a review of contingency fees charged by preparers of SR&ED claims.
  • More clean and bioenergy equipment assets will now qualify for tax deductions
    Budget 2012 calls for the expansion to the eligibility for the accelerated capital cost allowance for clean energy generation equipment to include the following:
    Waste-fuelled thermal energy equipment used for space and water heating applications; Equipment that is part of a district energy system that distributes thermal energy primarily generated by waste-fuelled thermal energy equipment; Equipment that uses residue of plants to create electricity and heat.
  • Temporary small biz hiring credit extended for another year; Gov’t says this will reduce 2012 payroll costs by $205 million
    The Federal Government will extend the temporary Hiring Credit for Small Business to make it more attractive to hire new workers. A credit of up to $1,000 against a small employer’s increase in its 2012 Employment Insurance premiums over those paid in 2011 will be provided.
  • The Royal Canadian Mint will be penniless by Fall 2012; however consumers can continue to use pennies indefinitely
  • Gov’t says new EI pilot project will provide claimants with more incentive to accept new jobs and keep higher proportion of their earnings
    Budget 2012 invests $74 million to introduce a new, national EI pilot project that will provide benefits to EI claimants who accept work by allowing them to keep more of what they earn while they are on EI.
  • Budget 2012 cites PwC study on ease of paying taxes, announces new actions to reduce the tax admin and compliance burden for businesses
    PwC’s report Paying Taxes 2012, an international study on the ease of paying taxes is referenced in this year’s Federal Budget and describes how Canada ranks higher than any other G-7 country based on the overall ease of complying with tax obligations.
    The government has proposed or announced the following actions in Budget 2012:
    • Simplified administration for partnerships
    • Improvements to the rules for paying eligible dividends
    • Administrative improvements to enhance the predictability of the SR&ED program
    • Written responses to business enquiries
    • Expansion of web forms for information returns
    • Enhancements to the CRA’s secure “My Business Account” portal
    • An improved business section on the CRA’s website
  • Gov’t looks to foreign trade opportunities with China, EU, India, Asia-Pac, Trans-Pacific Partnership, “Mercosur” and Africa
  • Budget commits $1.1 billion over 5 years to R&D and $500 million to VC’s; enough for future innovation?
    The Government in Budget 2012 highlights what it calls its commitment to a new approach to supporting innovation which will focus resources on private sector, university and other leading institution needs. This includes:
    • $500 million over five years, starting in 2014-2015 to the Canada Foundation for innovation to support advanced research infrastructure
    • $400 million to help increase private sector investments in early stage risk capital, and to support the creation of large-scale venture capital funds by the private sector
    • $110 million per year to the National Research Council to double support to companies through the Industrial Research Assistance Program
    • $37 million annually starting this year to the granting councils to enhance their support for industry-academic research partnerships
    • $105 million over two years to support forestry innovation and market development
    • $100 million to the Business Development Bank of Canada to support its venture capital activities
  • Companies will benefit from the Government’s “one project – one review”: modernizing the review process for major Canadian economic projects
    The Government is proposing legislation to streamline the review process for major economic projects. The aim is to modernize the federal regulatory system to establish clear timelines, reduce duplication and regulatory burdens within projects and focus resources on large projects where the potential environmental impacts are the greatest.
  • 15% Mineral Exploration Tax Credit for flow-through share investors extended until March 2013
    The Federal Government plans to extend the temporary 15% Mineral Exploration Tax Credit for flow-through share investors for an additional year. This credit helps junior exploration companies raise capital by providing an incentive to individuals who invest in flow-through shares issued to finance mineral exploration.
  • Gov’t plans to state its jurisdiction over the banking sector in the Bank Act; clarifies rules against banks offering insurance services
    The Government will introduce a preamble into the bank Act to clarify the intent that all banking activities throughout Canada be governed exclusively by the Federal Government, to avoid creation of local and potentially inconsistent rules to those of the federal banking regulatory framework.
    As previously announced, the Government will propose a legislative amendment to clarify the prohibition against banks offering life annuities or products of a similar nature.
  • Foreign investment restrictions lifted for telecom companies that hold less than a 10% share of the Canadian telecoms market
    The Government plans to introduce improvements to the foreign ownership review process and introduce legislative amendments to lift foreign investment restrictions in the telecoms sector for companies that hold less than a 10% share of the total Canadian telecoms market.
  • Seniors will be able to defer receipt of OAS pension for up to 5 years and receive a higher OAS amount in the future
  • Gov’t further limits ability of multinationals to increase interest deductions in Canada by buying foreign affiliates
    The Government is restricting the ability of foreign-based multinational corporations to transfer, or “dump”, foreign affiliates into their Canadian subsidiaries with a view to creating tax-deductible interest or distributing cash free of withholding tax.
    It is also making changes to Canada’s thin capitalization rules, which seek to prevent Canadian corporate profits from being distributed to certain non-resident shareholders free of Canadian income tax by way of interest payments on excessive debt.
  • Phased out: 10% Mineral Exploration and Development Tax Credit & Atlantic Investment Tax Credit for oil & gas mining assets acquired after 2015
Contact
Christopher Kong
+1 416 869 8739
Email

Local Contacts »

British Columbia

2012 British Columbia Budget

On Tuesday, February 21, 2012, the British Columbia Minister of Finance, the Honourable Kevin Falcon, introduced the province’s 2012 budget.

The budget changes certain income tax rates, both corporate and personal. It introduces a number of new tax credits, enhances some existing tax credits and reverses several previous tax credit enhancements. In addition, the budget modifies the application of certain other taxes in British Columbia. This Tax memo discusses these and other tax initiatives provided by the budget release, after outlining the fiscal aspects.

Contact
Brad Sakich
+1 604 806 7730
Email

Of further interest

Manitoba

2012 Manitoba Budget

On Tuesday, April 17, 2012, Manitoba’s Minister of Finance, Stan Struthers, presented the province’s 2012 budget. Read our Tax memo to learn moare about the tax measures announced in the budget.

Contact
Joe Eyolfson
+1 204 926 2492
Email

Of further interest

Ontario

2012 Ontario Budget

On Tuesday, March 27, 2012, Ontario’s Minister of Finance, Dwight Duncan, presented the province’s 2012 budget. Read our budget analysis to learn more about how changes introduced in the budget will affect taxpayers.

Contact
Ryan Thulien
+1 416 869 2342
Email

Of further interest

Quebec: November

2013 Quebec Budget Highlights

On November 20, 2012, Nicolas Marceau, Quebec Minister of Finance, delivered the 2013/2014 Budget of the Government of Quebec. Read our summary of highlights from the budget.

PwC's Full Budget Commentary

Download PDF
Read Online

PwC's budget highlights

Download PDF
Read Online

Contact
Pierre Lessard
+1 514 205 5034
Email

Rémi Tremblay
+1 418 691 2488
Email

Of further interest

Quebec: March

2012 Quebec Budget Highlights

Quebec's Minister of Finance Raymond Bachand presented the province's 2012 budget on March 20. The 2012 Quebec budget does not change the personal or corporate income tax rates. It introduces new tax credits for specialized corporations in certain sectors of activities.

Read our summary of highlights from the budget.

PwC's Full Budget Commentary

Download PDF
Read Online

PwC's budget highlights

Download PDF
Read Online

Contact
Pierre Lessard
+1 514 205 5034
Email

Rémi Tremblay
+1 418 691 2488
Email

Of further interest

Saskatchewan

2012 Saskatchewan Budget

On March 21, the Honourable Ken Krawetz, the Minister of Finance in Saskatchewan tabled the budget. Read our analysis of the budget to learn more about tax changes introduced for both individuals and corporations.

Contact
Erick Preciado
+1 306 668 5913
Email

Of further interest