Federal budget earns solid "B" grade say Canada's Chartered Accountants



    TORONTO, March 19 /CNW/ - Reducing the federal debt by $9.2 billion and
providing targeted tax relief to those Canadians who most need support earned
the Federal Finance Minister a solid "B" grade, Canada's Chartered Accountants
said today.
    Canada's CAs rated the budget on the three key factors needed to generate
strong, long-term economic growth and job creation: debt reduction, controlled
spending and broad-based low taxes for businesses and individuals.
    "Today's budget earns a solid B because it is a step in the right
direction," said Kevin Dancey, FCA, President and CEO of the Canadian
Institute of Chartered Accountants. "There are some significant benefits for
individual Canadians and businesses in this budget. Yet we are disappointed it
does not include broader based tax reductions for individuals and businesses
that would help sustain Canada's economic health for future generations."
    Canada's CAs are pleased the government is committing $9.2 billion to
debt reduction this year and another $6 billion over the next two years. "This
will provide the government with the ability to generate significant personal
tax savings in future years," said Dancey, adding that Canada's CAs are also
pleased by the tax relief provided to seniors, families and low income
Canadians and for businesses for new investment in manufacturing and
processing equipment.
    One of the main reasons we can only grade the budget a B is because
program spending is up almost 8% this year and 6% next year. Departmental
operating costs are ahead almost 10% this year and this is forecasted to
continue next year. This pace of growth is in excess of the rate of inflation
and overall economic growth. "This cannot continue," said Dancey. The
government must address this situation as soon as possible to bring spending
down.
    Overall Canada's CAs believe the measures provided in this budget are a
step in the right direction. "What is needed now is for the federal government
to commit to lowering personal and business taxes even more, and fully commit
to controlling program spending," Dancey said, adding that Canada's CAs will
continue to look to the federal government for leadership in this area.

    The Canadian Institute of Chartered Accountants (CICA), together with the
provincial, territorial and Bermuda Institutes/Ordre of Chartered Accountants,
represents a membership of approximately 71,000 CAs and 9,500 students in
Canada and Bermuda. The CICA conducts research into current business issues
and supports the setting of accounting, auditing and assurance standards for
business, not-for-profit organizations and government. It issues guidance on
control and governance, publishes professional literature, develops continuing
education programs and represents the CA profession nationally and
internationally.

    
                         Budget 2007: Key Highlights

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    Debt Reduction:
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     -  The federal surplus for 2006/07 is $9.2 billion.
     -  For 2006-07, the Government plans to reduce the federal debt by
        $9.2 billion. The Government remains on target to lower the federal
        debt-to-GDP (gross domestic product) ratio to 25 per cent by 2012-13.
     -  The debt-to-GDP ratio is expected to be 25% in 2012-13.
     -  The Tax Back Guarantee, which will be legislated with Budget 2007,
        directs over $1 billion a year in debt interest savings to personal
        income tax reductions.

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    Government Program Spending:
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     -  Program spending will increase by almost 8% this year compared to
        last year. ($175B 05/06, $189B 06/07). Program spending will decrease
        to 5.6% in 07/08 and 3.6% in 08/09.
     -  Departmental Operational Costs have increased almost 10% over last
        year, and falls to 6.6% for 07/08, and 3.4% in 08/09.
     -  The government has not brought spending down to the rate of
        inflation, adjusted for population growth as stated in their election
        platform. This will only be achieved in 2008/09.

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    Personal Tax Reductions:
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    Child Tax Credit:  A $2,000 child tax credit will provide up to a maximum
                       of $310 per child in tax relief.

    For seniors, there is less in terms of new savings in this budget, as
    pension income splitting was announced last fall.
     -  New in this budget is the RRSP rollover to a RIF has been pushed back
        to 71 from 69 years old.
     -  Pension Income Splitting (no details, still awaiting legislation).
     -  The age amount increased by $1000 to $5066 from $4066 last fall.

    Registered Education Savings Plans:
     -  Eliminating the $4,000 limit on annual contributions.
     -  Increasing the lifetime RESP contribution limit from $42,000 to
        $50,000.
     -  Increasing the maximum Canada Education Savings Grant annual amount
        from $400 to $500 and to $1,000 from $800 if there is unused grant
        room from low contributions made in previous years.

    Other Measures introduced in Budget 2007:
     -  Introducing a new Working Income Tax Benefit of up to $500 for
        individuals and $1,000 for families. This will reward and strengthen
        incentives to work for an estimated 1.2 million low-income Canadians,
        helping them over the "welfare wall."
     -  Helping parents and others save toward the long-term financial
        security of persons with severe disabilities with a new Registered
        Disability Savings Plan.
     -  Creating an Enabling Accessibility Fund with $45 million over three
        years to contribute to the cost of improving physical accessibility
        for persons with disabilities.
     -  Eliminating the capital gains tax for charitable donations of
        publicly-listed securities to private foundations.

    Lifetime Capital Gains Exemption to $750,000 from $500,000 for small
    business owners, farmers, fishermen and fisherwomen.

    Vehicle Efficiency Incentive (VEI) structure that will cover the full
    range of passenger vehicles available today. The VEI will have three
    distinct components and come into effect March 20, 2007:
     -  A performance-based rebate program offering up to $2,000 for the
        purchase of a new fuel-efficient vehicle.
     -  Neutral treatment of a broad range of vehicles with average fuel
        efficiency that are widely purchased by Canadians.
     -  A new Green Levy on fuel-inefficient vehicles.

    Public Transit Tax Credit:
    Budget 2007 proposes to extend the public transit tax credit to include
    electronic fare cards that are used for at least 32 one-way trips in a
    monthly period. Transit authorities will need to track and certify usage
    and cost. Further, the public transit tax credit will be provided where
    four weekly passes are purchased consecutively.

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    Corporate Tax Reductions:
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    Budget 2007 proposes to double the value of goods that may be imported
    duty- and tax-free by returning Canadian residents after a 48-hour
    absence, to $400 from $200.

    Budget 2007 proposes a new investment incentive for Manufacturing &
    Processing businesses. For investment in eligible machinery and equipment
    from now until the end of 2008, businesses engaging in manufacturing or
    processing will be eligible to claim accelerated capital cost allowance
    at a rate of 50 per cent on a straight-line basis. The proposed rate will
    allow these investments to be written off over a two-year period on
    average, after taking into account the half-year rule, which treats
    assets as if they had been purchased in the middle of the year. This
    measure will apply to investments in eligible machinery and equipment on
    or after March 19, 2007, and before 2009 by businesses engaged in
    manufacturing or processing in Canada of goods for sale or lease.

    Budget 2007 proposes to extend the exemption to active business income
    from non-treaty jurisdictions as well as treaty countries, provided those
    jurisdictions agree to exchange tax information with Canada.

    The existing Accelerated Capital Cost Allowance will be fully
    grandfathered for oil sands assets in project phases that commenced major
    construction prior to March 19, 2007. For other projects that have not
    yet begun major construction, in recognition of long project timelines,
    Budget 2007 will allow companies to maintain the ability to claim ACCA
    until 2010, with the rate being gradually reduced between 2011 and 2015.

    International Tax Fairness Initiative, Budget 2007 proposes to:
     -  Eliminate the deductibility of interest incurred to invest in
        business operations abroad.
     -  Improve our information exchange agreements with other countries.
     -  Provide more resources to the Canada Revenue Agency to strengthen
        their audit and enforcement activities.

    Aligning Capital Cost Allowance Rates with Useful Life, Budget 2007
    proposes to:
     -  Increase the CCA rate for other non-residential buildings to
        6 per cent from 4 per cent.
     -  Increase the CCA rate for computers to 55 per cent from 45 per cent.
     -  Increase the CCA rate for natural gas distribution pipelines to
        6 per cent from 4 per cent.
     -  Increase the CCA rate for liquefied natural gas facilities to
        8 per cent from 4 per cent.
     -  (The CCA changes are effective for eligible property acquired on or
        after March 19, 2007.)

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    Accountability Issues:
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    The Government's new Expenditure Management System, which will focus on
    good management and value for money. Under the new system:
     -  Departments and agencies will manage their programs to clearly
        defined results, and assess their performance against those results.
     -  The Treasury Board Secretariat will oversee the quality of these
        assessments and ensure that departments explicitly address risk as
        well as cost-effectiveness.
     -  Building on these assessments, Cabinet will systematically review the
        funding and relevance of all program spending to ensure that spending
        is aligned with Canadians' priorities and effectively and efficiently
        delivers on the Government's responsibilities.
     -  Cabinet will undertake a rigorous examination of all new spending
        proposals, taking explicit account of the funding, performance and
        resource requirements of existing programs in related areas.
    





For further information:

For further information: Canada's CAs are available for comment on the
budget. To arrange an interview or comment on the content of the budget,
contact Angela Kooij, Manager, Media Relations, at (416) 204-3450, or by
e-mail at angela.kooij@cica.ca or John Struthers at (613) 761-3106

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Canadian Institute of Chartered Accountants

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FEDERAL BUDGET REACTION 2007

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