The 2017–18 Federal Budget extends parental leave, maintains the capital gains inclusion rate, simplifies the Caregiver Credit System, adds tax to alcohol and tobacco and gives the CRA more money to fight tax evasion.
Millards Chartered Professional Accountants has released it’s annual Federal Budget Commentary in response.
Brad Sinclair, CPA, CA and Partner at Millards Chartered Professional Accountants in Brantford says the commentary provides both clients and the greater public with a quick overview of the budget’s critical points.
The 2017–18 Federal Budget is not dramatic but does contain changes that will impact many Canadians.
Sinclair says while the budget still doesn’t include any plans to balance the books, “it does attempt to close tax loopholes, steady deficits, and offer a general sense of cautious optimism.”
Budget 2017 outlines only $200 million in net new spending, but also an increase to the deficit of more than $5 billion for 2017–18.
The new Federal budget includes an increased tax on alcohol and tobacco. The tax adds a penny to the price for a litre of wine, and just over two cents to a litre of spirits.
A 24-pack of beer will increase by five cents and 200 cigarettes will cost an additional 53 cents.
These higher excise taxes are expected to put $85 million into government coffers in 2017-18.
Public Transit Tax Credit
The Public Transit Credit is proposed to be eliminated under the budget for transit use after June 30, 2017. The elimination of this tax credit results in a tax increase for transit riders.
Corporate & Personal Income Tax
There are no changes to corporate or personal income tax rates or the small business deduction threshold.
The Budget did not propose a number of changes that were the subject of heavy speculation. In particular, the capital gains inclusion rate will not increase and remains at 50 per cent.
The CRA Is Getting Tough
In order to advance the twin goals of reducing tax evasion and improving compliance, the government plans to give the Canada Revenue Agency an additional $523.9 million over the next five years.
“The CRA will be aggressively perusing reduce tax evaders and the government anticipates a five-fold return on its investment. They hope to recover $2.5 billion for their efforts.”
Child Care Space Investment Tax Credit
The Budget eliminates the investment tax credit for child care space expenditures incurred after March 21, 2017. Expenditures incurred before 2020 pursuant to written agreements entered into before March 22, 2017 will still be eligible for the investment tax credit.
Tuition Tax Credit
Effective January 1, 2017, the Budget proposes to expand the types of courses that are eligible for the Tuition Tax Credit.
The Tuition Tax Credit can currently be claimed with respect to occupational skills courses taken at a non-post-secondary institution. In contrast, the credit cannot be claimed for similar non-post-secondary level courses taken at a college or university.
“The Budget proposes to allow the Tuition Tax Credit to be claimed in the latter instance and, further, to allow the scholarship exemption for bursaries related to such courses, provided that all other conditions for the exemption are met.”
The Liberals have honoured their campaign promise to extending parental leave and benefits to 18 months.
Parents who choose to stay at home will have to make do with a lower Employment Insurance benefit rate of 33 per cent of their average weekly earnings.
“Canadians can still choose the traditional 12-month leave at the higher benefit rate of 55 per cent”.
The government has set aside $7 billion for early learning and childcare programs. That’s in addition to $500 million for one year pledged in the 2016 budget.
“According to the budget, the funding could serve to create more affordable childcare spaces for low-income families.”
Canada Caregiver Credit
The existing Caregiver Credit, Infirm Dependent Credit and Family Caregiver Tax Credit each have different eligibility rules.
“The Budget proposes to simplify these existing credits by replacing them with a single new, nonrefundable credit, the Canada Caregiver Credit.”
This credit will provide tax relief of up to 15 per cent of $6,883 (in 2017) for expenses for care of dependent relatives with infirmities, and up to 15 per cent of $2,150 (in 2017) for expenses for care of a dependent spouse/common-law partner or minor child with an infirmity.
There is no requirement for the dependent to live with the caregiver to claim the credit. This new credit will start to be reduced when the dependent’s net income is above $16,163 (in 2017, indexed to inflation for taxation years after 2017).
Disability Tax Credit
The Budget proposes to allow nurse practitioners to certify impairments for purposes of the Disability Tax Credit. This measure will be effective for certifications made after March 21, 2017.
Medical Expense Tax Credit
Fertility-related expenses for the 2017 taxation year and beyond: the Budget proposes to clarify the types of fertility related expenses that are eligible for the Medical Expense Tax Credit.
“In particular, persons who require medical intervention to conceive, even if not infertile, will explicitly be allowed to claim the credit for expenses that would generally be eligible for someone who has an infertility condition.”
Opioid Overdose Treatment Drug
When Health Canada began allowing Naloxone to be dispensed without a prescription, the drug’s historical GST/HST exemption was technically lost. The Budget proposes to include Naloxone on the list of GST/HST-free nonprescription drugs to restore its GST/HST-free status.
Taxi and Ride-Sharing Services
“Starting July 1, commercial Web application ride-sharing services like Uber will be subject to the same taxes as taxis.”
To ensure that the GST/HST applies consistently to taxi services and ride-sharing services, effective July 1, 2017, the definition of a taxi business will be amended to require providers of ride-sharing services to register for the GST/HST and charge tax on their fares in the same manner as taxi operators.
Tobacco and Alcohol Taxation
Effective March 23, 2017, the Budget proposes to repeal the 10.5 per cent surtax on manufacturers of tobacco products with a coordinated increase to the excise duty rates on tobacco. Excise duties on alcohol products are proposed to be increased by two per cent, effective March 23, 2017, with annual indexing of rates thereafter.
Indigenous communities have been promised $3.4-billion over the next five years to improve the socio-economic conditions of Canada’s first peoples.
“Most of the new money is directed at infrastructure and healthcare.”
There is also new money for child care, postsecondary education, employment initiatives, language and culture preservation, alternative sentencing, rehabilitation of Indigenous offenders, land-claims settlement, and meeting the oversight recommendations of the Truth and Reconciliation Commission.
The budget creates Innovation Canada, with $950 million over five years to support innovators and build hubs for innovation known as Super-clusters.
Despite repeated calls from the United States for Canada to increase our contributions to international military efforts, there is no increase in defence spending in the 2017 budget.
The budget reiterates the Government’s promise that the government will allow injured veterans the option of receiving a disability award through a lifetime pension rather than through a lump-sum payment.
The budget also dedicates $17.5-million over a four year period to create a new Centre of Excellence. The facility will deal with Post-Traumatic Stress Disorder and related mental-health conditions.
Do you have questions about the Federal Budget Commentary or the 2017–18 Federal Budget? Millards has 7 Southern Ontario locations to serve you. Contact us today and find out more about our wide range of accounting, auditing and assurance services.
Sinclair graduated from the University of Waterloo in 1994 with BA in Math. His practice areas include design and implementation of tax minimization strategies for businesses and their owners, personal and corporate tax planning as well as commodity taxes. He has specialized skills around US tax and cross border issues as well as estate planning and succession arrangements.