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Canadian Taxpayer Group Notes 2018 Tax Policy Changes

by Mike Godfrey,, Washington

01 January 2018

The Canadian Taxpayers Federation has published its annual report on the tax changes to be introduced during 2018.

CTF Federal Director Aaron Wudrick said: "There are no dramatic income tax changes on the federal side. Canadians can for the most part breathe easy, but they shouldn't expect to have much more money in their pockets."

CTF said that there will be only minor changes to federal taxes in 2018. Employment Insurance (EI) premiums will rise from 1.63 percent to 1.66 percent. The Canada Child Benefit (CCB) will be inflation-indexed from July 2018.

On the income tax front, Saskatchewan, Prince Edward Island, and Nova Scotia will not index their tax brackets in 2018. Ontario will not index its top two tax brackets. New Brunswick will index its tax brackets to federal, as opposed to provincial, inflation. CTF said that as inflation in New Brunswick was higher than the national average, taxpayers in the province will be affected by bracket creep.

British Columbia's health tax will be reduced by 50 percent from January 1. The province will however increase the tax rate on income over CAD150,000 from 14.7 percent to 16.8 percent.

Nova Scotia has introduced a means-tested increase in its basic and spousal amounts. The full benefit will be available to those earning less than CAD25,000 and phased out for those earning more than CAD75,000.

A number of changes will be made to carbon pricing systems throughout Canada. The federal Government has announced plans for a national carbon floor price by the end of 2018, to be implemented in any province that does not already operate a pricing system.

CTF noted that Nova Scotia plans to implement a cap-and-trade system on large emitters in 2018, and that Manitoba will introduce a CAD25 per tonne tax sometime next year. Announcements by the Prince Edward Island and Newfoundland and Labrador governments on their prospective systems are expected in early 2018. Saskatchewan has no plans for a carbon tax.

Certain of the provinces that already operate carbon pricing systems will increase their rates next year. British Columbia's carbon tax will rise from CAD30 to CAD35 per tonne from April 1, and Alberta's rate will increase from CAD20 per tonne to CAD30 per tonne from January 1.

As regards business taxation, Wudrick noted that there is "still considerable uncertainty… both with respect to the Trudeau Government's controversial small business tax proposals, and due to recent dramatic cuts south of the border which will impact Canada's competitiveness."

Canada's federal Government has proposed lowering the small business tax rate from 10.5 percent to 10 percent from January 1, 2018, and to nine percent from January 2019. However, it has also signalled its intention to forge ahead with plans to restrict the use of income sprinkling by private corporations. This legislation is intended to enter into force from January 1, 2018. Changes to the taxation of passive investment are also expected.

The US recently passed legislation to cut its corporate tax rate from 35 percent to 21 percent.

TAGS: tax | investment | small business | business | tax thresholds | legislation | tax planning | tax rates | carbon tax | social security | Canada | tax reform | trade | inflation | individual income tax

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