Finance Minister Bill Morneau released his fourth budget (the “Budget”) on March 19, 2019. The Budget forecasts a deficit of $14.9 billion for the 2018-2019 fiscal year, but is expected to increase to approximately $20 billion for the next two fiscal years. Canada’s current net debt to GDP ratio of roughly 28% remains the lowest by a considerable margin of the G7 countries, and among the lowest of the G20 countries.
Given that the this Budget is the last one to be delivered by the present Liberal government before the upcoming federal election, it is not surprising that there were no increases announced to the personal or corporate income tax rates, nor to the 50% capital gains inclusion rate. Hopes of personal income or corporate income tax cuts were never anticipated, given the size of the government’s current budgetary deficit and its commitment to continue to spend and invest as a means of stimulating Canada’s economy.
The Budget announced $22.8 billion in new spending initiatives over the next five years. Some of those initiatives include $1.25 billion over three years on a shared-equity mortgage program for first time home buyers, $3.25 billion to Indigenous Services, $2.2 billion for municipal infrastructure spending, and $1.25 billion over five years for border security and modernization.
The Budget provided some initiatives to assist young adults. Some of the key initiatives include lowering the interest rate on student loans under the Canada Student Loans program from a floating rate to the prime lending rate, increasing the maximum withdrawal permitted under the RRSP Home Buyer’s Plan from $25,000 to $35,000, the new mortgage program for first time home buyer’s mentioned above, and to introduce the Canada Training Program. This program will provide all working Canadians age 25 to 64 with a $250 per annum non-taxable training credit (max. $5,000 credit over one’s lifetime) which could be used towards the cost of future training. This tax credit system will be operated through the Employment Insurance Program, and will also provide a training support benefit, to assist the individual with their living expenses as they pursue their training.
A detailed summary of the income tax measures proposed in the 2019 Federal Budget, can be found here.