Budget’s tax measures receive mixed reviewBy The IJ Staff | March 20 2019 11:30AM
While it offers some positive measures, the federal budget announced March 19 has missed key opportunities, according to the Chartered Professional Accountants of Canada.
In particular, CPA Canada says it is disappointed that the government did not announce a comprehensive review of Canada's tax system, which has not occurred since the 1960s.
"This was a squandered opportunity," says Joy Thomas, president and CEO, CPA Canada. "There is a groundswell of support for a full-scale tax review in Canada, and a much-needed assessment would pave the way for an improved system that best positions the country for economic and social growth. We hope the platforms of the government and other political parties signal their respective support for a full-scale tax review in the upcoming federal election campaign."
The budget included some tax measures, including the introduction of the Canada Training Credit. This refundable personal tax credit of $250 per year can be accumulated to provide financial support to help cover up to half of eligible tuition and fees associated with training.
Changes were also announced to the Home Buyers' Plan (HBP), notably by increasing the HBP withdrawal limit to $35,000 from $25,000.
Limiting stock options
The budget also introduced a measure to limit the use of the current employee stock option tax regime to start-ups and growth companies and for other companies, to the first $200,000 of underlying share value annually for options granted to an employee, noted CPA Canada.
CPA Canada welcomed the fact that the budget contains further investments to combat tax evasion and includes measures aimed at cracking down on money laundering.
No target date to return to a balanced budget
However, the organization criticized the budget for failing to include a date for a return to balanced budgets.
"Canada needs a plan for fiscal stability, one that establishes a target date for a return to balanced budgets over the medium term," says Thomas. "The government must demonstrate that it has a plan to eventually rein in spending and address persistent deficits, especially with the economic uncertainty facing the global economy today. This would greatly assist in creating business confidence and minimizing the burden on future generations."
Little relief for small businesses
Meanwhile, the Canadian Federation of Independent Business (CFIB) stated that it is disappointed that the 2019 federal budget “provides little relief for small businesses facing a barrage of new and higher taxes.”
The organization says small businesses are facing a growing tax burden from “seven years of CPP premium hikes, higher taxes for many family businesses and those with passive investments and the new and rising federal carbon backstop about to hit firms in four provinces.”
Reservations about new training benefit
The CFIB says it has reservations about the new Canada Training Benefit benefit. This program will increase the cost of the Employment Insurance system by over $300 million per year “with no guarantee of any link to the needs of employers,” says the organization.
"The tax picture for small businesses in 2019 and beyond remains decidedly negative. The hundreds of millions in new EI costs as a result of the Canada Training Benefit could have provided important relief for small firms facing higher CPP costs and new carbon taxes," CFIB president Dan Kelly.
The CFIB added, however, that it is pleased that the government is planning an EI Small Business Premium Rebate to help cover some of the increased costs to fund the new program.
Intergenerational transfers of businesses
The organization also underlined other measures that it considers to be positive in the new budget, including measures on regulatory modernization, including the creation of an External Advisory Committee on Regulatory Competitiveness; relief for farmers and fishers from "arm's length" rules that limited access to the small business deduction and further consultation to facilitate intergenerational transfers of businesses that are currently affected by higher tax rates than when sold to strangers.