Canada's 2018 Federal Budget Summary

Finance Minister, Bill Morneau tabled the Liberal government’s third budget February 27, 2018.  The Finance Minister is projecting a deficit for the current 2017/18 year of $19.4 billion after an expected budget deficit of $28.5 billion.  The government’s expectation is to bring the 2018/19 federal budget to a deficit of $18.1 billion.  The minister stated the government will not get out of deficit by the end of the government’s term. He emphasized the government’s focus was on federal debt to GDP ratio which is projected to drop from 30.4% presently to 28.4% by 2022/23.  This budget focused on spending programs.  No changes were made to business and corporate income taxes other than those previously announced during the summer of 2017 and updated in the fall of 2017.  The government has added $21.5 billion dollars of new spending measures.

Programs and Spending

  • New pay equity legislation for federal employees and federally regulated businesses
  • Enhanced use it or lose it EI parental programs to encourage more men to take parental leave and encourage more women to re-enter the workforce
  • New Advisory Council to explore the possibility of a national pharmacare program
  • $90 million to improve accuracy and timeliness of receiving EI benefits
  • $127 million to improve call centres for EI
  • $447 million for Indigenous skills and employment training
  • $1.4 billion over six years towards First Nations child and family services
  • $400 million over ten years for Innuit housing
  • $500 million for Metis housing
  • $3.2 billion over 5 years to support physical, life, social and health sciences at universities and other institutions
  • $600 million invested in government laboratories
  • $700 million towards a new Industrial Research Assistance Program
  • $572 million to opening access to Big Data and Advanced computing resources
  • $508 million for a new Canadian Centre for Cyber Security
  • $116 million to the RCMP National Cyber Crime Coordination Unit
  • $431 million to deal with ongoing issues of the federal government’s Phoenix payroll system
  • $594 million towards hosting the 2018 G& Summit
  • $50 million over five years funding to non-government organizations supporting local journalism
  • Undisclosed funding to replace VIA Rail’s car fleet
  • $62 million for Cannibis education
  • $10 for Canibis research
  • $192 towards legal assistance in softwood lumber disputes within NAFTA and WTO
  • $2 billion over five years in international aid
  • $448 million over five years in the Canada Summer Jobs program
  • $172 million over five years for the Canadian Media Fund
  • $75 million to bolster Asian trade efforts
  • $90.6 million over five years to assist I fighting tax evasion
  • $41.9 million to assist courts in their backlog issues
  • $173.2 million for border security
  • $231 million over five years to address the opiod crisis
  • $10 million over five years to the RCMP to review 25,000 sexual assault cases deemed unfounded
  • $1.3 billion over five years to conserve land, waterways and wildlife
  • $100 million over five years to develop rural broadband innovation
  • $30 million over three years to promote women and girl’s participation in sport
  • Free admission to children to national parks

Business Tax Measures

  • Initially announced in the summer of 2017, amended with changes in the fall of 2017,the government has again softened the original plans to tax passive income within corporations.  The new system unveiled in the budget reduces the amount of active business income subject to the low small business corporate income tax rate once passive income reaches $50,000.  Once the passive income reaches $150,000, the corporation no longer qualifies for the lower small business tax rate.  Passive income is loosely defined as investment income on assets not used in the day to day operations of a business.
  • Also announced in the summer and amended in the fall, the Tax on Split Income rules will remain as amended in the fall.  These rules prevent the splitting of income between high income shareholders and their lower income spouses and older children via dividends.  The rules depend on a reasonableness of amounts paid to contributions to the business that are sure to be tested in the courts in the coming years.

Individual Tax Measures

  • Canada Workers Benefit takes effect in 2019 and replaces the current Working Income Tax Benefit.  The new benefit will increase the benefit and raise the income at which the benefit will be phased out.  According to the government, a single parent or couple earning $25,000 per year will receive $717 more in 2019 compared to 2018.
  • A new medical expense credit for specially trained service animals assisting individuals with severe medical impairment.

Trust and Estates

  • No additional tax changes in this budget after significant changes introduced in 2016
  • Additional reporting requirements have been proposed
  • New late filing penalties have been introduced.

Excise Taxes

  • $1 per carton tax on cigarettes
  • A new excise tax framework for cannabis products

These details can be reviewed on the government’s budget page.