Minister of Finance Francois-Philippe Champagne and Prime Minister Mark Carney in the House of Commons after tabling the federal budget on Nov. 4.Blair Gable/Reuters
If the Liberal government’s highly anticipated spending plan, released on Tuesday, didn’t live up to the hype, that’s not necessarily a bad thing for clients. When it comes to federal budgets, boring is often better.
The residue of more “exciting” documents was evident in this one. As Rudy Mezzetta reported, cancelling the previous government’s capital gains tax increase means foregoing about $24-billion in revenue over six years. Nixing that hike to the inclusion rate also meant abandoning the accompanying Canadian entrepreneurs’ incentive.
Gone, too, are splashy policies from earlier budgets deemed ineffective or expensive to administer: the underused housing tax; the luxury tax on boats and planes. And while rule changes for bare trusts are still a part of Prime Minister Mark Carney’s plans, they’re not something to worry about for at least another year.
Those are examples of the kind of excitement most advisors can do without on budget day. But what about the good stuff?
The government had little room to cut tax rates, and the budget was short on new credits. The election promise to reduce the rate for the lowest tax bracket is already in legislation, and the budget introduced a temporary top-up of non-refundable tax credits to prevent cases of low-income taxpayers paying more.
Still, investors will welcome a few new items.
A group of asset managers was pleased to see a nod to “emerging fund managers” and their role in economic growth.
The Canadian Asset Management Entrepreneurship Alliance (comprised of the Alternative Investment Management Association Canada, CFA Societies Canada, the Portfolio Managers Association of Canada and the Emerging Managers Board) formed in the spring to pitch targeted tax incentives and regulatory changes that would make it easier for new firms to enter Canada’s asset management space.
The budget included $1-billion over three years to stimulate venture capital investment by incentivizing pension funds and other institutional investors to invest. The mention in the budget was brief and short on detail, but Department of Finance spokesperson Marie-France Faucher said the initiative will also support new and emerging fund managers.
“I think it’s a really exciting change in tone, and recognition of the investment decision-making layer in allocating capital that’s so important,” says Michael Thom, managing director, CFA Societies Canada, and co-founder of CAMEA.
The main carrot for business is the “productivity super-deduction,” but some investors will also appreciate the expansion of the critical mineral exploration tax credit to include a dozen other critical minerals.
On the personal tax side, there’s also a refundable tax credit worth up to $1,100 a year for eligible personal support workers, and a one-time $150 boost to the new Canada disability benefit.
As with all government spending plans, the follow-through is the most important part. And a fall budget presents new implementation challenges.
Our budget coverage continues next week, when Rudy Mezzetta hosts a discussion with Brian Ernewein, senior advisor, national tax, at KPMG LLP on Thursday. See you there.
- Mark Burgess, Globe Advisor assistant editor
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