Surrey Board of Trade Pleased with Reduced Forecast of Deficit, Remains Concerned about Federal Tax Reform Detail

Today, the Federal Government released their Fall Economic Update.

“The Surrey Board of Trade is pleased to hear that Canada’s economy is doing well. The federal deficit will be reduced to just below $20 billion this fiscal year, down from the projected $29 billion for 2017. The government is also promising $15 billion in new spending,” said Anita Huberman, CEO, Surrey Board of Trade.

Business-friendly measures such as improving access to capital and skilled labour, greater regulatory clarity and a more balanced tax rate would further boost Canada’s economic well-being.

“Further, the Surrey Board of Trade was pleased to see several changes to the proposed federal tax legislation which would have impacted small businesses and Surrey’s city-building activities. However, we are still waiting for details that will be a part of the implementation behind the new tax changes. We are urging businesses to work with their accountants and closely monitor how and when these changes will impact their business. Certainly the Surrey Board of Trade will be watching very closely.”

“The Surrey Board of Trade is advocating for a full and independent review of the federal tax system to make it less of a drag on Canada’s competitiveness.”

We observed that Canada now has the fastest-growing economy in the G7 and among the strongest in job growth. With the Fall Economic Statement, the Government will:

  1. Strengthen the Canada Child Benefit (CCB) by making annual cost of living increases starting in July 2018—two years ahead of schedule. For a single parent of two children making $35,000, a strengthened CCB will contribute $560 in the 2019–20 benefit a year towards the cost of raising his or her children.
  2. Enhance the Working Income Tax Benefit (WITB) by an additional $500 million per year, starting in 2019. This will be in addition to the increase of about $250 million annually that will come into effect in that year as part of the enhancement of the Canada Pension Plan. These two actions will boost the total amount the Government spends on the WITB by about 65% in 2019, increasing benefits to current recipients and expanding the number of Canadians receiving support.
  3. Lower the small business tax rate to 10%, effective January 1, 2018, and to 9%, effective January 1, 2019. We should be cautious about the lowering of business taxes to 9%.  It sounds good, but the cost on shareholder distributions just went up as the personal dividend tax credit is decreased accordingly, to maintain an integrated system.  This means that the drop of 1% on future tax is offset by the fact that all business now has to pay 1% more on their distributions of their pre-change ineligible retained earnings.
    Finance Minister Bill Morneau today tabled a Notice of Ways and Means Motion in the House of Commons today that proposes legislative changes to strengthen the Canada Child Benefit and lower the small business tax rate.