Economy-Boosting Bill Introduced In Canada

by Mike Godfrey, Tax-News.com, Washington

07 October 2011

As part of the ongoing Budget implementation process, the Canadian Finance Minister has introduced legislation designed to generate job creation and stimulate economic growth, with measures including a series of key new tax credits.

Introduced by Jim Flaherty, the Keeping Canada’s Economy & Jobs Growing Act includes elements of the Budget he reproduced in June, titled "The Next Phase of Canada’s Economic Action Plan—A Low-Tax Plan for Jobs and Growth", and follows the introduction of a Ways and Means motion implementing certain other budget measures. The Act focuses heavily on the introduction of new tax credits.

The tax credits established or reformed in Flaherty's new act are as follows:

• A temporary Hiring Credit for Small Business to encourage additional hiring will be introduced.
• A Volunteer Firefighters Tax Credit for volunteer firefighters is to be set up.
• The government will introduce new Children’s Arts Tax Credit for programmes associated with children’s artistic, cultural, recreational and developmental activities.
• A Family Caregiver Tax Credit to assist caregivers of all types of infirm dependent relatives will follow the passage of the Act.
• The limit on the amount of eligible expenses caregivers can claim under the Medical Expense Tax Credit in respect of financially dependent relatives will be removed.
• A new Children’s Arts Tax Credit for programs associated with children’s artistic, cultural, recreational and developmental activities is to be implemented.
• The Mineral Exploration Tax Credit for flow-through share investors will be extended by one year to support Canada’s mining sector.
• The Act also aims at helping apprentices in the skilled trades and workers in regulated professions by making occupational, trade and professional examination fees eligible for the Tuition Tax Credit.

Other measures included in the Act are:

• Tax support for clean energy generation to encourage green investments will be expanded.
• Customs tariffs will be simplified in order to facilitate trade and lower the administrative burden for businesses.
• The government will extend the accelerated capital cost allowance treatment for investments in manufacturing and processing machinery and equipment for two years to support the manufacturing and processing sector.
• The mandatory retirement age for federally regulated employees will be removed to give older workers wishing to work the option of remaining in the workforce.
• The Act legislates for a permanent annual investment of CAD2bn in the Gas Tax Fund to provide predictable, long-term infrastructure funding for municipalities.
• The Wage Earner Protection Program will be enhanced to cover more workers affected by employer bankruptcy or receivership.
• The government will make it easier to allocate Registered Education Savings Plan assets among siblings, without incurring tax penalties or forfeiting Canada Education Savings Grants.
• Numerous tax loopholes that allow a few businesses and individuals to avoid paying their fair share of tax will be closed.

Flaherty said of the Act that: “Our government is focused on what matters to Canadians—creating jobs and promoting economic growth. While Canada has the strongest job growth record in the G-7 with nearly 600,000 net new jobs created since July 2009 and the IMF projects that we will have among the strongest economic growth in the G-7 over the next two years, we are not immune from global economic turbulence. That’s why we need to stay the course and implement the Next Phase of Canada’s Economic Action Plan.”

Commenting on the legislation, Dan Kelly, senior vice-president for the Canadian Federation of Independent Business (CFIB), pointed to the introduction of a temporary hiring credit as especially important. He said that: “Since the 2011 budget announcement, many members have called about the credit and reported it will make it easier for them to hire, enhance wages or adjust to rising Employment Insurance premiums. This is a particularly important initiative as the government has declared 2011 as the Year of the Entrepreneur.”