Federal Budget 2018

The February 27 Federal budget did not contain any measures specific to retail but does include a number of items that may be of interest to RCC members.

The budget has been characterized as a social policy budget, with a particular focus on gender parity. While the new gender equity policies do not affect retail directly, given that they apply only to federally-regulated industries, some of the measures like “use or lose it” parental leave provisions could have a small impact on the retail workplace if, as expected, the provinces amend their own parental leave provisions.

Economic policy measures are few and far between in the 2018 budget, which, notably does not seek to address the elimination of Canada’s corporate income tax advantage in the wake of US tax reform. The only economic policy measures of national importance are sizeable new investments in scientific research.

This is not particularly surprising for the third budget of a four-year mandate. When first elected, the Trudeau government signalled a strong social policy orientation and that it would act on gender disparity and on reconciliation with indigenous Canadians. Yesterday’s budget is looking to lay some track on these two signature issues. Next year’s budget will be the last one before a federal election and we can expect that Budget 2019 will be a much broader document, addressing both social end economic issues as the government puts forward its case for re-election.

One retail-specific issue that did not make it into this year’s budget is credit card interchange. While negotiations are well-advanced between the government and the credit card networks, they were not settled in time for budget inclusion and we can expect to see a separate announcement in spring 2018 on any reductions in interchange rates and other rule changes with respect to payments.

The following specific items may be of interest:

Social Policy

A new Canadian Workers’ Benefit (replacing the Working Income Tax Benefit) with a higher benefit level and the important enhancement of automatic enrolment by the Canada Revenue Agency will increase disposable income by close to $1 billion among modest-income Canadians.

Parental Leave

The government has introduced the option for extended parental leave under the EI program for those couples who choose to share parental leave periods. In essence, the current 35-week entitlement can be extended by 5 weeks to 40 weeks as long as each partner takes a minimum of five weeks parental leave. While this is an extension of EI parental benefits, its purpose is to facilitate earlier return to work by primary caregivers, the preponderance of whom are women at present, so may lead to shorter “Mat leaves”.

Taxation

Passive investment rules have been simplified from the contentious proposals made in July 2017. The new approach would phase-out eligibility for the $500,000 small business income deduction where a business’ passive investment income is greater than $50,000 annually. The $5-for-$1 phase-out would be complete at $150,000 of passive investment income.

Security

A significant investment in cyber security envisages the federal government taking a greater leadership role overall and in providing businesses with guidance and tools to combat cybercrime.

The overstretched Canadian Border Services Agency will receive additional funds in 2018-19. Because a level playing field between Canadian retail sales and imported parcels depends upon CBSA’s ability to collect taxes and duties effectively, RCC is encouraged by this investment.

If you have any questions or concerns, please don’t hesitate to contact: Karl Littler, Vice President, Public Affairs at: klittler@retailcouncil.org or 416-467-3783