On 27 February 2018, the Federal Government presented its third budget: Equality + Growth: a Strong Middle Class.
Shorter executive summary of the 2018 Federal Budget:
The Federal Government’s 2018 Budget touts Canada’s strong economic growth over the past two years, including real GDP growth of 3.2 per cent since the second quarter of 2016, an unemployment rate of 5.9 per cent, and significant improvements in average weekly earnings, consumer confidence, and household consumption. The Finance Minister expects similar growth in the near-term.
Highlights of Changes
- Reducing the federal small business tax rate to 10 per cent effective January 1, 2018 and 9 per cent as of January 1, 2019
- Reducing access to the small business tax rate for businesses with investment income in excess of $50,000 (expected to apply 2019). Access to the small business tax rate will be completely eliminated once the investment income of a business (including any associated corporations) exceeds $150,000
- Changes to refundable tax system that, subject to certain exceptions, requires non-eligible dividends (rather than eligible dividends) to be paid to recover refundable tax unless Part IV tax was paid on the receipt of eligible portfolio dividends (effective for tax years commencing after 2018)
- Additional reporting requirements for trusts (effective 2021 tax year)
- “Use it or lose it” EI parental benefits (expected availability June 2019)
Federal Deficit and Debt
The Finance Minister has not set a timeline for balancing the budget, but has substantially reduced the projected annual deficits through 2022–23 and expects the net debt-to-GDP ratio to decline over the period as well. The previously projected deficit for 2017–18 was $28.5 billion and now sits at $19.4 billion. Similarly, the projected deficit for 2021–22 was $18.8 billion and has been revised down to $13.8 billion. The federal debt-to-GDP ratio is currently 30.4 per cent and is projected to decline to 28.4 per cent by 2022–23.