Representing about 99% of all businesses in Canada, small businesses are critical to the health of the Canadian economy. To further their growth and development, the government is proposing to lower the tax rate, currently at 11% to 9% by 2019, and improve the access to important growth-producing capital. Canada’s total business tax costs are the lowest in the G7 and 46% lower than those in the United States. By lowering the tax rate, the Government hopes to increase capital investment to spur job creation.
The Economic Action Plan 2015 proposes to amend the Canada Small Business Financing Act to allow more small businesses to apply for financing under the Canada Small Business Financing Program. The changes will allow for an increase in loans on real property from $500,000 to $1 million and raise the small business eligibility from $5 million or less in gross revenue to $10 million or less. Improving access to financing and increasing access to venture capital is expected to help innovative, high-growth companies prosper and create jobs.
Throughout the year, employers are required to withhold from employee wages amounts related to income tax, CPP and EI premiums. Currently, new employers are required to remit payments monthly for the first year and then, if eligible, remit quarterly thereafter. Beginning in 2016, new employers will be eligible for quarterly remitting if they have monthly withholdings of less than $1,000. An estimated 80,000 new employers each year will benefit from the reduction of monthly remittance payments to quarterly payments, essentially eliminating 640,000 required payments to the Canada Revenue Agency each year.
Recognizing the importance of manufacturers and processors to the Canadian economy, the Government has taken action to strengthen the sector’s competitiveness by creating a low-tax environment and investing in research and development. Manufacturers are being provided with a 10-year tax incentive to invest in productivity-enhancing equipment. In addition, Canadian automotive parts suppliers will be provided with up to $100 million over five years to support product development and technology demonstration through the new Automotive Supplier Innovation Program.
To further support investment in productivity-enhancing equipment, the government is proposing to provide manufacturers with an accelerated CCA rate of 50% on a declining-balance basis for eligible assets acquired between 2015 and 2026, versus the current straight-line depreciation which will expire at the end of 2015.
Vehicle manufacturers are demanding a supply of innovative products to meet new fuel efficiency, emission and safety standards and address the growing consumer interest in connected and automated vehicle technologies. The Automotive Innovation Fund will support strategic, large-scale R&D projects to build innovative, greener and more fuel-efficient vehicles.
The government recognizes that innovative ideas contribute to enhanced opportunities for Canadians and Canadian businesses, including new jobs, economic diversity and improved trade. As such, it is proposing to provide more than $1.5 billion over five years to advance the renewed science, technology and innovation strategy’s objectives. In addition, the government is proposing to provide $1.33 billion over six years (starting in 2017-2018) to the Canada Foundation for Innovation to support advanced research infrastructure, $100 million of which will be directed to digital research infrastructure.
Intellectual property is a valuable strategic asset for innovators and entrepreneurs competing locally and globally. The government is proposing to modernize the current framework to keep pace with international best practices. Amendments to the Patent Act, Trade-marks Act and Industrial Design Act are proposed to provide IP agents with a statutory privilege for confidential communications with clients, thereby enhancing Canada as a place to invent and market innovations.
The government is proposing amendments to the Canada Business Corporations Act to promote gender diversity in corporate leadership roles among public companies, using the “comply or explain” model introduced by securities regulators and required of TSX-listed companies. Amendments will also be proposed to director election processes and shareholder communications to increase transparency by banning bearer instruments, which enable the identity of an owner to be concealed.
About two-thirds of the job openings in Canada over the next decade are expected to be in occupations that require a post-secondary education. The government is proposing to provide $119 million over four years to reduce the expected parental contribution under the needs assessment process under the Canada Student Loans Program. In addition, the government is proposing to provide $116 million over four years to remove the penalty on post-secondary students who work by eliminating the in-study student income.
The government is proposing to provide $184 million over four years (starting in 2016-17) to expand eligibility for Canada Student Grants in short-duration programs, enabling Canadians to acquire or upgrade skills for quick entry into the labour market. In addition, the government is lowering the qualification of the program from 60-weeks to 34-weeks which will benefit about 42,000 additional students per year.
The job vacancy rate in the skilled trades is currently above all occupations (4.9% skilled vs. 3.9% all others in 2014). To reduce barriers to accreditation in the skilled trades and improve labour mobility, the government is proposing to implement recommendations of the Canadian Council of Directors of Apprenticeship to harmonize training and certification requirements. This will allow for common technical training curriculum content and training hours in order to ensure that apprentices have credentials that are recognized in all provinces and territories.
As announced in November 2014, the government plans to invest $5.8 billion over six years to build and renew infrastructure assets across the country. The investment is a long-term commitment to building and maintaining world class infrastructure in Canada and includes projects in the areas of historic sites, national parks, on-reserve schools, federally-owned buildings, airports, rail and research facilities, small craft harbours, heritage and museum sites, border infrastructure and Canadian Armed Forces facilities.
Large cities in Canada depend on public transit infrastructure to facility the efficient and speedy mobility of people and goods to support economic development. The new Public Transit Fund will provide funding of $750 million over two years starting in 2017-2018 and $1 billion annually each year thereafter. Federal support will be allocated based on merit of projects that will be delivered through alternative financing and funding mechanisms involving the private sector which demonstrate value for money for taxpayers.
To allow farm and fishing business owners to maintain more of their capital for retirement, the government is proposing to increase the Lifetime Capital Gains Exemption for qualified farm or fishing property to $1 million, which will apply to dispositions of qualified property that occur on or after Budget Day 2015. The government estimates that this will reduce capital gains for qualified owners by about $50 million over the next five years.
Vancouver’s International Maritime Centre aims to attract foreign investment into Canada, facilitate foreign shipping companies and support business with Vancouver headquarters. As Canada’s largest port and a link to over 150 trading economies, Port Metro Vancouver is essential in promoting Canada as a maritime centre. The government is proposing to provide $3 million over three years to support the International Maritime Centre, which will be cost-matched by the province of British Columbia.
Canada benefits from large reserves of natural gas, but has a limited capacity to supply it to international and domestic markets where demand is growing. The government is proposing accelerated capital cost allowance treatment for assets used in facilities that liquefy natural gas, in the hope of allowing businesses to recuperate initial capital investments faster. The deferral of tax associated with this proposal is expect to reduce federal taxes by $45 million over the next five years.
Canada is widely recognized as a global leader in mining and has the largest global share of spending on exploration, plus 380,000 Canadian jobs in the mining and mineral processing industries. As announced on March 1, 2015, the government is affirming its support of junior mining companies by extending the 15% Mineral Exploration Tax Credit for flow-through share investors for another year. This is expected to help junior mining companies maintain their access to capital. In 2013, more than 250 companies issued flow-through shares with the benefit of the credit to more than 19,000 individual investors.
In 2013, the National Energy Board, which regulates all aspects of the oil, gas and electric utility industries, conducted about 300 compliance activities to ensure that the infrastructure for transporting energy met rigorous safety, security and environmental requirements. Over the next five years, the government is proposing to provide $80 million to the National Energy Board to enhance engagement with Canadians and contribute to the safety and environmental protection associated with energy transportation infrastructure. The funding is expected to be fully cost-recovered from the industry.
The government is continuing its commitment to ease the burdens on families. This budget proposes increasing the tax-free savings account annual contribution limit to $10,000, reducing EI premiums for over 16 million Canadians in 2017 and extending compassionate care benefits from six weeks to six months to assist Canadians supporting elderly family members.
The government is proposing a substantial lowering of the Registered Retirement Income Fund minimum withdrawal factors to enable seniors to preserve more of their retirement savings to ensure they have sufficient funds to support their retirement needs. It is estimated that this will provide about $670 million in federal tax relief for seniors between 2015 and 2020. In addition, the government is proposing to introduce a new, permanent, non-refundable 15% Home Accessibility Tax Credit for seniors and persons with disabilities on eligible home renovation expenditures up to $10,000.
The federal government is proposing to provide $5 million over five years to the Competition Bureau to investigate alleged cases of unjustified cross-border price discrimination. This is an extension of its Price Transparency Act, which gave the Bureau the tools to help ensure Canadians are not charged higher prices than Americans solely on the basis of geography.
Currently, donations of private shares and real estate to registered charities can give rise to a capital gains tax. In order to encourage higher donation levels, the government is proposing an exemption from capital gains tax for donations involving private shares and real estate. The proposal contemplates that the proceeds from the sale of these assets to third parties would be exempt from capital gains tax if the proceeds are donated within 30 days of the sale.
In addition, the government is proposing to allow charities to invest in limited partnerships which would allow for more flexibility to diversify their investments while also addressing pressing social and economic needs in their communities.
The government is proposing a number of new and modified initiatives to support veterans and the families and organizations that care for them. The government is introducing a new Retirement Income Security Benefit to provide additional financial security for disabled veterans and a new tax-free Family Caregiver Relief Benefit for the informal caregivers. Changes to existing programs include expanded access to Permanent Impairment Allowance to help compensate veterans for loss of career opportunities and increasing level of individualized care for veterans by increasing the ratio of veterans to case managers.
The Canadian government remains committed to a publicly funded, universally accessible health care system. The Canada Health Care Transfer is the largest major transfer to the provinces and territories and supports the principles of the Canada Health Act. The government is proposing an increase in the Transfer by a projected $27 billion over the next five years to ensure that the government’s long-term fiscal position is sustainable, while providing stability of funding to the provinces and territories.
Budget 2015 proposes an increase in national defence spending which will increase the National Defence budget by $11.8 billion over the next 10 years and provides $292.6 million over the next five years to counter terrorism. The government is renewing its commitment to strengthen Canada’s borders and maintain sovereignty over our lands. However, security extends beyond borders and land to cyber space and, as such, the government is also increasing spending on cyber security. It proposes to provide $58 million over the next five years to safeguard federal essential cyber systems and critical infrastructure against cyber-attacks, as well as providing $36.4 million over the next five years to ensure Canada’s vital cyber systems remain safe and reliable.
The government is affirming its commitment to providing Canadians with a balanced budget by introducing balanced budget legislation that will ensure a prudent approach to fiscal planning for future generations. The legislation will contemplate that the legitimate reason for a government deficit is a response to a severe economic downturn.
The Canada Revenue Agency has taken actions to strengthen tax compliance. The government is further supporting these actions with proposals to provide $118.2 million over the next five years to expand the Underground Economy Specialist Teams, which will adopt new approaches to identify and combat underground activities and $25.3 million over the next five years to expand activities that combat international tax evasion and aggressive tax avoidance.