Federal Budget 2016
2016 federal budget pledges to strengthen middle class while extending forecasted deficits until 2020
Federal government focuses spending on job creation, re-energizing the economy and fortifying Canada's social fabric
Toronto - As widely expected,Finance Minister Bill Morneau presented a deficit budget. While promising to grow the middle class through an array of widespread investments in Canada's future economic and social well-being, the federal budget offers hopeful measures within the government's well-known financial constraints. With some of the budget's key deliverables leaked in advance, no real surprises were revealed.
The government forecasts a deficit of $5.4 billion for 201516, and projects additional deficits of $29.4 billion (2016-17), $29 billion (2017-18), $22.8 billion (2018-19), $17.7 billion (2019-20) and $14.3 billion (2020-21).
On a positive note, Canada is starting from a relatively strong fiscal position in 2016, with the lowest total government net debt-to-GDP ratio of all G7 countries. This ratio is projected to decline beginning in 2017-18 to the end of the fiscal horizon.
"Today's budget was interesting for what wasn't there," said Keith MacIntyre, National Leader, Tax, Grant Thornton LLP. "The campaign promise of a small business deduction did not come to fruition, nor were other incentives offered in its place. As well, the government's planned infrastructure spending does not appear to target innovation or commercialization of technologies, which would create employment and new businesses for millennials. We were pleased to see that there were no changes to stock options."
One of the more significant personal tax measures in the federal budget is the elimination of the Universal Child Care Benefit (UCCB) and the Canada Child Tax Benefit (CCTB). They will be replaced with a new non-taxable Canada Child Benefit where the payments will be based on income. First payments under this new program will begin in July 2016.
From a business perspective, although last year's budget announced a reduction in the small business rate from 11% to 9% over a four year period, this year's budget proposes that the small business tax rate remain at 10.5%. The budget also introduces changes to address concerns about partnerships and corporate structures that multiply access to the small business deduction.