The 2010 Federal Budget was announced last Thursday, March 4th, and it looks like the government is on track with the Economic Action Plan. Although it will still be some time before Canada sees a full recovery, we are headed in that direction. There are quite a few positives that are worth mentioning to provide a clearer picture of the recovery that Canada has made to date.

  • This year, Canada will have the lowest overall tax rate on new business investment in the G7.
  • By 2012, Canada will have the lowest statutory corporate income tax rate in the G7.
  • Canada’s federal tax-to-GDP (gross domestic product) ratio is at its lowest level since 1961.
  • As a result of the expiration of the Economic Action Plan and the measures in this budget, the deficit is projected to decline by almost half over the next two years to $27.6 billion in 2011–12, and by two-thirds to $17.5 billion in 2012–13. In 2014–15, the deficit is projected to be $1.8 billion.
  • Finance minister predicts real growth in economy of 2.6% in 2010 and 3.29% in 2011.
  • One objective was to maintain or create 220,000 jobs – Action Plan has contributed to the creation of over 135,000 jobs recorded since July, 2009.

Budget Highlights

  • Under Year 2 of Canada’s Economic Action Plan, $19 billion has been allotted in new federal stimulus to create and maintain jobs, complemented by $6 billion from provinces, territories, municipalities and other partners;
  • Over $4 billion in actions to create and protect jobs. This includes additional Employment Insurance (EI) benefits and more training opportunities to help unemployed Canadians through this difficult period, and help ensure they are equipped to re-enter the workforce and prosper in the future.
  • $7.7 billion in infrastructure stimulus to create jobs. This will modernize infrastructure, support home ownership and improve social housing across Canada. This builds on the $8.3 billion investment in infrastructure and housing delivered in 2009–10.
  • $2.2 billion to support industries and communities. This will support adjustment and provide job opportunities in all parts of Canada that have been hit hard by the economic downturn. It provides support for affected sectors, including forestry, agriculture, small business, tourism, shipbuilding and culture.
  • Providing $3.2 billion in personal income tax relief to support growth and job creation.
  • Delivering $1.6 billion to strengthen benefits for the unemployed.

Business Relief

  • Making Canada a tariff-free zone for industrial manufacturers by eliminating all remaining tariffs on machinery and equipment and goods imported for further manufacturing. When fully implemented, this will provide $300 million in annual duty savings for Canadian business to support investment and growth and create jobs.
  • Providing $7.2 million over two years to improve Canadian fish and seafood industry access to the international marketplace.
  • Delivering $75 million over three years to support investments by Canadian cattle processing plants to help improve their operations to ensure cattle producers have access to competitive cattle processing operations in Canada.
  • Launching a new Small and Medium-sized Enterprise Innovation Commercialization Program with $40 million over two years.
  • Satellite and cable set-top boxes acquired after March 4, 2010 will qualify for a 40% declining balance capital cost allowance rate.
  • Freezing the Employment Insurance premium rate at $1.73 per $100 of insurable earnings to the end of 2010—the lowest rate since 1982—in order to leave more money in the hands of employers and employees.

Research and Development

  • Providing $45 million over five years to establish a post-doctoral fellowship program to help attract the research leaders of tomorrow to Canada.
  • Doubling the budget of the College and Community Innovation Program with an additional $15 million per year.
  • Delivering $222 million in funding over five years to strengthen the world-leading research taking place at TRIUMF, Canada’s premier national laboratory for nuclear and particle physics research.
  • Increasing the combined annual budgets of Canada’s research granting councils by an additional $32 million per year, plus an additional $8 million per year to the Indirect Costs of Research Program.
  • Renewing and making ongoing $49 million in annual funding for the regional development agencies to support innovation across Canada.
  • Establishing the Next Generation Renewable Power Initiative, with $100 million over the next four years to support the development, commercialization and implementation of advanced clean energy technologies in the forestry sector.
  • Providing Genome Canada with an additional $75 million for genomics research.

Environmental Measures

  • Expand the types of property that are included in Class 43.2 (specified clean energy generation and conservation equipment) generally for assets acquired after March 3, 2010
  • Allowing more corporations to transfer or “renounce” Canadian Renewable and Conservation Expenses to an investor using flow-through shares, retroactive to taxation years ending after 2004.
  • Establishing the Next Generation Renewable Power Initiative, with $100 million over the next four years to support the development, commercialization and implementation of advanced clean energy technologies in the forestry sector.
  • Expanding eligibility for accelerated capital cost allowance for investment in clean energy generation assets.

Strengthening the Financial Sector

  • Canada’s financial sector has been widely acknowledged as being one of the strongest in the world. Budget 2010 will further strengthen the sector by moving forward with the majority of provinces and territories toward a Canadian securities regulator, extending access to financing for Canadian businesses, and enhancing disclosure and financial institutions’ business practices to better protect consumers. Moving forward with the majority of provinces and territories to establish a Canadian securities regulator within the next three years.
  • Extending access to financing through continuation of the Business Credit Availability Program (BCAP) and the creation of the Vehicle and Equipment Financing Partnership under BCAP.
  • Moving ahead with a Code of Conduct for the Credit and Debit Card Industry in Canada and proposing legislation to provide the Minister of Finance with the authority to regulate the market conduct of the credit and debit card networks, if required.

Interest on overpaid taxes

  • Effective July 1, 2010, the interest rate payable to corporations in respect of income tax, Goods and Services Tax/Harmonized Sales Tax among other things, will decrease by 2 percentage points.

Taxation of corporate groups

  • The budget announces that the government will explore new rules for the taxation of corporate groups, including a formal loss transfer system or consolidated reporting.

The Budget stills needs to pass through Ascension so nothing is written in stone just yet, but there are very positive steps being taken to ensure the recovery and growth of Canada. There is a big focus being placed on Canada’s financial status with initiatives being put in place to ensure that Canada stays on track with the plan to reduce our deficit, and also to rank Canada as a powerhouse in the G7 group. Each of the major industries had certain requests to lighten the stress that has been placed during the recession, and although not all demands will be met, the government has introduced some progressive plans and things are certainly looking up.