Federal Finance Minister Bill Morneau delivered his fourth (and final) budget of this mandate on March 19, 2019. Unsurprisingly, an election-year budget is targeted at voting constituencies, including youth, workers requiring skills training, seniors, and millennials entering housing markets. Because of the budget’s focus on individuals/voters, there is little that affects business directly, but there are some notable indirect effects in training and housing.
There were no changes in tax rates in this budget either in corporate or personal income tax.
The Budget has moved to tighten the employee stock option deduction. Specifically, for employees of “large, long-established firms”, the government will apply a $200,000 annual cap on an employee’s stock option grants that may receive tax-preferred treatment.
This move will not apply to small businesses, nor will it apply to stock options already granted.
The government is establishing bankable training credits of $250 per person per year ($5,000 lifetime) to reduce income taxes for individuals undertaking training – along with an up to four-week eligibility period every four years for EI benefits in order to take training courses.
The other shoe to drop on this will be future amendments to employee leave provisions at the provincial level that would allow for time off from work in order to attend training. It is envisaged that employers will have a role in signing off on these training courses, though the details are yet to be finalized.
RCC is seeking to determine if employers are able to “top-up” EI benefits to ensure that employees are financially able to attend training courses. If done effectively, this could have the EI program assume part of the cost of paying employees’ salaries during work-related training.
RCC has already received assurance of support from the Office of Small Business Minister Mary Ng for the proposition that the new training program should allow for EI with an employer top-up, though other Ministries will need to be involved in the final decision.
To address housing affordability, Canada Mortgage and Housing Corporation will offer first-time homebuyers shared equity mortgages of up to 10% on a new home purchase and 5% on the purchase of a resale home. In essence, these shared equity mortgages delay repayment to CMHC until the home is sold, so the cost of borrowing over the life of the mortgage is reduced significantly.
The Home-Buyers Plan RRSP withdrawal limit will also be increased from $25,000 to $35,000.
These moves are expected to breathe new life into home construction and could bring benefit to retailers in the home improvement, appliances and furniture. It is questionable how effective these measures would be in markets like Vancouver and Toronto, as the CMHC shared equity mortgages will only be available to families with total income under $120,000 annually.
A new national drug agency, The Canadian Drug Agency will be established to coordinate the negotiation of drug prices from the pharma industry and to develop a Pan-Canadian formulary.
Food and Alcohol Regulations
The Budget proposes to digitize the Canadian Food Inspection Agency services that currently rely on a paper-based system for issuing export certificates.
Currently, Canadian exporters are required to submit forms by mail and wait for those forms to be returned prior to exporting their products. The online system will allow exporters to complete these forms online and they will be able to export their products more rapidly.
The Government intends to remove the federal requirement that alcohol moving from one province to another be sold or consigned to a provincial liquor authority. Though provinces and territories would continue to be able to regulate the sale and distribution of alcohol within their boundaries.
The Government will develop a Food Policy for Canada, including four areas for near-term action:
- Help Canadian Communities Access Healthy Food – primarily about supporting local food projects including farmer’s markets and food banks and also funding a $25 million promotion campaign for Canadian Agricultural products;
- Make Canadian Food the Top Choice at Home and Abroad; – notably the investment of $100 million to support agri-food value-added production. The government will also launch a three-year immigration pilot for non-seasonal agricultural workers;
- Support Food Security in Northern and Indigenous Communities; and
- Reduce Food Waste – the government announced $20 million in funding for awards to the most innovative food waste reduction proposals in food processing, grocery retail and food service. However, these funds are spread over five years, so only an average of $4 million annually.
The government also reiterated its commitment to address plastic waste but did not announce any new measures, referring instead to supporting the efforts of the Canadian Council of Ministers of the Environment to develop and action plan for the National Strategy for Zero Plastic Waste.
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