Reducing the Tax Burden for Canadians | Chris Alexander, MP ...

The tax reductions provided during the stimulus phase of Canada?s Economic Action Plan were an essential part of the Government?s effort to boost economic growth and establish a competitive business environment, which helps create more and better-paying jobs and increase living standards for Canadians. The tax reductions built on actions taken since 2006 and reinforced the Government?s ambitious agenda of creating a tax system that fuels investment and job creation in Canada.

Actions taken by the Government since 2006, including those in the stimulus phase of the Economic Action Plan, will reduce taxes on individuals, families and businesses by an estimated $220 billion over 2008?09 and the following five fiscal years. In total, the Government has introduced more than 140 tax relief measures since 2006.

Tax relief for Canadian families and individuals (not including housing-related tax relief) provided under the stimulus phase of the Economic Action Plan from 2008?09 to 2010?11 totalled $6.9 billion. These permanent measures provide tax relief on an ongoing basis.

Table A2.3
Reducing the Tax Burden for Canadians
millions of dollars

	2008?09	2009?10	2010?11	Total
Personal income tax relief for all taxpayers	470	1,885	1,950	4,305
Increases to the National Child Benefit supplement and the Canada Child Tax Benefit		230	310	540
Enhancing the Working Income Tax Benefit	145	580	580	1,305
Targeted relief for seniors	80	325	340	745
Total?Reducing the Tax Burden for Canadians	695	3,020	3,180	6,895
Notes: Totals may not add due to rounding. The Canada Child Tax Benefit and the National Child Benefit supplement are considered expenditures for budgetary purposes and thus should not be included in calculations of total tax relief.

The stimulus phase of the Economic Action Plan introduced significant new personal income tax reductions that have provided relief, particularly for low- and middle-income Canadians, as well as measures to help Canadians purchase or improve their homes. These tax reductions allow individuals and families to keep more of their hard-earned money and improve incentives to work, save and invest, while also contributing to the Government?s long-term economic agenda. For example, the Government:

• Increased the amount of income that Canadians can earn before paying federal income tax, and increased the top of the two lowest income tax brackets so that Canadians can earn more income before being subject to higher tax rates.
• Introduced the Working Income Tax Benefit in Budget 2007, and effectively doubled it in the stimulus phase of Canada?s Economic Action Plan. This enhancement lowered the ?welfare wall,? further strengthening work incentives for low-income Canadians already in the workforce and encouraging other low-income Canadians to enter the workforce. Canadians have been able to receive enhanced benefits since filing their 2009 tax return.
• Raised the level at which the National Child Benefit supplement for low-income families is fully phased out and the level at which the Canada Child Tax Benefit begins to be phased out, which is providing a benefit of up to $443 per year (in the 2011?12 benefit year) for a family with two children. Additional monthly benefits under these programs began to be paid to families with children in July 2009.
• Increased the Age Credit amount by $1,000 in 2009 to provide tax relief to low- and middle-income seniors. With indexation, this means additional tax savings of up to $157 for low-income seniors in 2012.
• Introduced a new tax credit of up to $750 to assist first-time home buyers and provided them with additional access to their Registered Retirement Savings Plan savings to purchase or build a home.

Supporting Families With Children

?Since 2006, the Government has significantly increased support for families to better assist them with the costs of raising children:

• The Universal Child Care Benefit, available since July 2006, gives families with young children more choice in child care by providing $100 per month for each child under age 6.
• The Child Tax Credit, available since 2007, recognizes the expenses associated with raising children by providing personal income tax relief of up to $329 in 2012 for each child under age 18.
• The Children?s Fitness Tax Credit, available since 2007, promotes physical fitness among children through a 15-per-cent credit on up to $500 in eligible fees for the enrolment of a child under age 16 in an eligible program of physical activity.
• The Children?s Arts Tax Credit, available since 2011, promotes children?s participation in artistic, cultural, recreational or developmental activities through a 15-per-cent credit on up to $500 in eligible fees for the enrolment of a child under age 16 in an eligible program.
• The amount that families can earn before the National Child Benefit supplement is fully phased out?or before the base benefit under the Canada Child Tax Benefit begins to be phased out?was increased starting in July 2009. As a result, a low-income family with two children receives an additional benefit of up to $443 in the 2011?12 benefit year.
• The spousal and other related amounts were increased to equal the basic personal amount so that single-earner families, including single parents, receive the same tax treatment as two-earner families, effective 2007.
• To help families with children with disabilities, the Government introduced the Registered Disability Savings Plan (RDSP) starting in 2008, and increased the Child Disability Benefit component of the Canada Child Tax Benefit as of July 2006. Families with infirm children may also claim the new Family Caregiver Tax Credit, a 15-per-cent credit on an amount of $2,000 available starting in 2012. Budget 2012 introduces several measures to improve the RDSP. These measures will give RDSP beneficiaries and their families increased flexibility to establish, contribute to and access savings from their plans.
• To help families with education costs, the Government took several actions to strengthen Registered Education Savings Plans and expand and enhance the Canada Student Loans Program, and launched the new consolidated Canada Student Grants Program. The Government also exempted scholarship and bursary income from tax and introduced the Textbook Tax Credit.
• Families are major beneficiaries of the substantial tax relief the Government has provided to all Canadians, such as the 2-percentage-point reduction in the Goods and Services Tax, broad-based personal income tax reductions, and the introduction of the Tax-Free Savings Account, which helps Canadians meet lifetime savings needs.
• In addition, many families are benefiting from other more targeted tax measures introduced since 2006, such as the Working Income Tax Benefit, the Canada Employment Credit, the Public Transit Tax Credit and the First-Time Home Buyers? Tax Credit.
• The average family of four is now saving more than $3,100 per year in taxes, and more than 1 million low-income Canadians have been removed from the tax rolls in 2012.
• Altogether, actions taken since 2006 will provide about $160 billion of tax relief for individuals and families over 2008?09 and the following five fiscal years.

Supporting Low-Income Working Canadians

Canada?s tax system ensures that people with lower incomes contribute a smaller proportion of their income in taxes. Indeed, more than 40 per cent of all taxpayers pay no net tax; that is, their tax liabilities are either nil or offset by income-tested benefits such as the Canada Child Tax Benefit and the GST Credit. In addition, low-income Canadians now pay significantly less tax and receive more benefits due to actions taken by the Government since 2006. In fact, in 2012, one third of the personal income tax relief provided by the Government will go to Canadians with incomes under $41,544, even though they pay about 13 per cent of taxes.

Since it was introduced in 2007, the Working Income Tax Benefit (WITB) has lowered the welfare wall, so that low-income individuals may keep more of their earnings. In 2012, if the WITB had not been introduced, a typical low-income single parent in Nova Scotia would have only kept about 28 cents of each additional dollar earned between $3,000 and $10,000, due to reduced benefits from federal and provincial income-tested programs and taxes. As a result of the enhanced WITB, the same family will keep about 53 cents of each additional dollar earned.

Other tax relief provided by the Government has also helped low-income working Canadians. For example, the amount that a single parent with one child can earn in 2012 before paying taxes has increased by $5,324 to $26,557 as a result of the introduction of the Canada Employment Credit, the Child Tax Credit and legislated increases to the basic personal amount, and the Eligible Dependant Credit.

Tax Relief for Job-Creating Businesses

A competitive business tax system is essential for creating an environment that encourages new investment, growth and job creation in Canada. In 2007, Parliament passed a bold tax reduction plan that lowered the federal general corporate income tax rate from 22.12 per cent in 2007 (including the corporate surtax that was eliminated in 2008) to 15 per cent in 2012. The stimulus phase of the Economic Action Plan built on these corporate income tax reductions to help position businesses to weather the effects of global economic challenges, invest in Canada, and spur innovation and growth?thereby creating more and better-paying jobs for Canadian workers. Stimulus measures included:

• Help for businesses to adopt newer technology at a faster pace: a temporary 100-per-cent capital cost allowance (CCA) rate was introduced for computers acquired after January 27, 2009 and before February 1, 2011.
• Help for businesses in manufacturing and processing industries to restructure and retool to position themselves for long-term success: the temporary 50-per-cent straight-line accelerated CCA rate for investments in manufacturing or processing machinery and equipment was extended to include investments undertaken in 2010 and 2011. This measure was first introduced in Budget 2007 and was extended, most recently in Budget 2011, to include investments undertaken before 2014.
• Support for small businesses: the amount of small business income eligible for the reduced federal income tax rate was further increased to $500,000 effective January 1, 2009, following a previous increase to $400,000 from $300,000 as of January 1, 2007.
• Support for mineral exploration activity across Canada: the temporary Mineral Exploration Tax Credit was extended.

These measures provided immediate economic stimulus, while also encouraging the type of productivity-enhancing investments that result in sustained growth.

Including measures in the stimulus phase of the Economic Action Plan, the Government has introduced business tax relief totalling roughly $60 billion over 2008?09 and the following five fiscal years.

Business tax cuts are benefiting Canadians in very important ways ? If governments had not provided tax relief for Canadian businesses, the recession would have been deeper and unemployment would have certainly been higher ? (now) we have a corporate sector that is better poised to take advantage of new market opportunities, which will, in turn, continue to generate job growth.

? Jayson Myers, President & CEO,
Canadian Manufacturers and Exporters
January 25, 2012 press release

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The tax system provides considerable support to small businesses through a lower corporate income tax rate, incentives for investors, enriched financial support for research and development (R&D) and simplified compliance.

Since 2006, the Government has introduced a large number of tax measures to support investment, innovation and growth by small businesses, including:

• To help small businesses retain more of their earnings for investment, expansion and job creation, the lower small business tax rate was reduced to 11 per cent from 12 per cent in 2008. The amount of income eligible for this lower rate was increased from $300,000 to $400,000 in 2007, and then to $500,000 in 2009.
• To spur investment in small businesses, Budget 2007 increased the Lifetime Capital Gains Exemption on qualified small business shares to $750,000 from $500,000, the first increase in the exemption since 1988.
• To enhance support for R&D through the Scientific Research and Experimental Development tax incentive program, Budget 2008 increased the amount of expenditures eligible for the higher, refundable tax credit to $3 million and extended eligibility to medium-sized companies by increasing the taxable capital and income limits.
• To help innovative companies attract venture capital, Budget 2010 narrowed the definition of taxable Canadian property, thereby eliminating the need for tax reporting under section 116 of the Income Tax Act for many investments. This improves the ability of Canadian businesses, including innovative high-growth companies that contribute to job creation and economic growth, to attract foreign venture capital.
• To encourage hiring in the small businesses sector, Budget 2011 announced a temporary Hiring Credit for Small Business of up to $1,000 against a small employer?s increase in its 2011 EI premiums over those paid in 2010. This temporary credit was available to approximately 525,000 employers whose total EI premiums were at or below $10,000 in 2010, reducing their 2011 payroll costs by about $165 million.
• To assist employers facing challenges, Budget 2011 also made available an extension of up to 16 weeks for active or recently terminated EI work-sharing agreements.

Budget 2012 further supports small businesses by announcing:

• An extension of the Hiring Credit for Small Business for one year, which will provide a credit of up to $1,000 against a small employer?s increase in its 2012 EI premiums over those paid in 2011.
• A new approach to setting EI premium rates that will ensure predictability and stability by limiting rate increases to 5 cents per year until the EI Operating Account is balanced, after which the Canada Employment Insurance Financing Board will be mandated to set a seven-year break-even rate to be recalculated every year.
• Actions to reduce the tax compliance burden for small businesses. This includes doubling the thresholds for eligibility to use the GST/HST streamlined accounting methods, simplifying administration for partnerships, and improving the rules for paying eligible dividends.

As a result of federal and provincial business tax changes, Canada has an overall tax rate on new business investmentthat is lower than that in any other G-7 country and below the average of the member countries of the Organisation for Economic Co-operation and Development (OECD) (Chart A2.2).

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Chart A2.2Marginal Effective Tax Rate¹?on New Business Investment, 2014

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¹?The marginal effective tax rate (METR) on new business investment takes into account federal, provincial and territorial statutory corporate income tax rates, deductions and credits available in the corporate tax system and other taxes paid by corporations, including provincial capital taxes and retail sales taxes on business inputs. The methodology for calculating METRs is described in the 2005 edition of?Tax Expenditures and Evaluations?(Department of Finance).The METR includes measures announced as of January 1, 2012.
It excludes resource and financial sectors and tax provisions related to research and development.
²?OECD average excludes Canada.
Source: Department of Finance.

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The government?s commitment to reducing the general corporate income tax rate to 15% by 2012 is important to our ongoing economic recovery and should be applauded.

? Gabe Hayos, Canadian Institute of Chartered Accountants
House of Commons Standing Committee on Finance
October 18, 2011

Improving the competitiveness of the Canadian tax system requires collaboration among all governments to help Canadian businesses compete globally. Provinces and territories have also taken action to enhance Canada?s business tax advantage (Chart A2.3.). These actions are helping Canada build a strong foundation for future economic growth, job creation and higher living standards for Canadians.

Source: http://www.chrisalexander.ca/2012/reducing-the-tax-burden-for-canadians/

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