On March 22, 2017, Finance Minister Bill Morneau delivered the 2017 federal budget (“the Budget”) and, as anticipated, it projects a deficit.
Instead of planning to eliminate the deficit as previously proposed, the government says it will maintain a balanced net debt-to-GDP ratio of around 31 per cent over the next five years. The deficit projected for 2017–18 is $28.5 billion, declining to $18.8 billion by 2021–22. However, if the government’s strong growth scenario plays out, we could see a much smaller deficit between $5 and $8 billion by 2021.
Despite speculation, there were no changes announced to:
- corporate or personal income tax rates,
- the employee stock option rules, nor
- the capital gains inclusion rate; the portion of capital gains subject to income tax remains at 50%.
We can expect to see more substantial proposals for change as the year progresses. The government has clearly signaled that it will be looking for additional ways to prevent tax avoidance. The government plans to give the Canada Revenue Agency an additional $523.9 million in funding over the next five years in order to reduce tax evasion and improve compliance. The government anticipates that the CRA will recover $2.5 billion for its efforts; a five-fold return on its investment.