By Yosie Saint-Cyr
On January 27, 2009, the federal government tabled their 2009 budget plan to stimulate economic growth, restore confidence and support Canadians and their families during a synchronized global recession. It will also position Canada to emerge from this recession in a stronger position. However, the government stated that the Economic Action Plan is based on three guiding principles-that stimulus should be timely, targeted and temporary.
Overall, the Economic Action Plan will provide almost $30 billion in support to the Canadian economy, or 1.9 percent of Canada’s gross domestic product. It is expected that it will create or maintain close to 190,000 Canadian jobs.
Of interest to employers, human resources professionals and payroll specialists:
- Changes to personal income taxes, specifically the basic personal amount: Budget 2009 will increase the basic personal amount to $10,320 for 2009 from $9,600 in 2008, representing a further increase from the 2009 pre-Budget Basic Personal Amount of $10,100. It is expected that the 2009 personal income tax changes will take effect in the spring of 2009, after Canada Revenue Agency publishes new payroll deduction tables, prior to the traditional July 1 timeframe.
- Personal income tax brackets (low to middle-income): The top of the first income tax bracket will be increased to $40,726 (pre-budget $38,832). This results in more income being taxed at the lowest 15-percent rate. The top of the second personal income tax bracket will be increased to $81,452 (pre-budget $77,664). This results in more income being taxed at the 22-percent rate, rather than the 26-percent rate. These bracket changes represent further increases from the 2009 pre-Budget income tax bracket threshold amounts implemented January 1. 2009. The increased amounts and bracket thresholds will continue to be indexed to account for inflation for 2010 and subsequent years. The 2009 personal income tax changes will take effect in the spring 2009 prior to the traditional July 1 timeframe.
According to the government, this means that a greater portion of Canadians’ earnings will be taxed at a lower rate. As a result of these changes, a single parent with two children earning $35,000 will be ahead $500 per year. A two-income couple with two children earning $70,000 will be ahead $275 per year. This tax relief will help low- and middle-income Canadians, and it will stimulate consumer spending. This in turn will help stimulate the entire economy.
- Age credits: Budget 2009 proposes to increase the Age Credit (for those 65 years of age and older) for 2009 and subsequent years. For 2009, the amount on which the Age Credit is based will be increased by $1,000 to $6,408, effective January 1, 2009, and indexed thereafter. The 2009 personal income tax changes will take effect in the spring 2009 prior to the traditional July 1 timeframe.
- It is also proposed that an amount equal to $580 million be added to the Working Income Tax Benefit (WITB) program for the 2009 and subsequent taxation years.
- Mandatory year-end electronic filing provisions: The CRA will increase efficiencies in the implementation of its programs by expanding mandatory electronic filing. The number of any particular type of income tax information return that can be filed by a taxpayer before the taxpayer is, under an existing income tax provision, required to file those information returns electronically will be reduced from 500 to 50. This measure will most often apply in practice in respect of T4 information returns for employment income. This measure will apply to information returns required to be filed for taxation years after 2009.
- Penalties filing information returns late or in an incorrect format: In light of the threshold changes for mandatory electronic filing from 500 to 50 slips there will also be new penalty provisions for late returns or returns received in an incorrect format. The penalties will be calculated based on the number of any particular type of information return that is filed in the incorrect format or that is filed late.
According to the Canadian Payroll Association analysis, for information returns that are filed in the incorrect format (i.e., non-electronic media) the penalty is proposed to be set at the following amounts:
• $250 – where the taxpayer is required to file more than 50 but less than 251 returns;
• $500 – where the taxpayer is required to file more than 250 but less than 501 returns;
• $1,500 – where the taxpayer is required to file more than 500 but less than 2,501 returns; and
• $2,500 – where the taxpayer is required to file more than 2,500 returns.
For information returns that are filed late, the penalty is proposed to be set at the greater of $100 and the following amounts:
• $10 per day – where the taxpayer is required to file less than 51 returns;
• $15 per day – where the taxpayer is required to file more than 50 but less than 501 returns;
• $25 per day – where the taxpayer is required to file more than 500 but less than 2,501 returns;
• $50 per day – where the taxpayer is required to file more than 2,500 but less than 10,001 returns; and
• $75 per day – where the taxpayer is required to file more than 10,000 returns.
The penalty for late-filed information returns will be limited to 100 days, meaning that it will be capped at between $1,000 and $7,500 (depending on the number of returns that are required to be filed). These penalties will apply to information returns required to be filed for taxation years after 2009.
- Freezing Employment Insurance (EI) rates through 2010, and other EI measures: In order to support employers and employees, the government will freeze EI premium rates for 2010 at $1.73, the same rate as 2008 and 2009. For 2011 and beyond, the CEIFB will begin setting premium rates on a break-even basis.
In addition, Budget 2009 proposes to increase for two years all regular Employment Insurance (EI) benefit entitlements by five extra weeks and increasing the maximum benefit duration to 50 weeks from 45 weeks.
Human Resources and Skills Development will establish an Expert Panel that will consult Canadians on how to best provide self-employed Canadians with access to EI maternity and parental benefits. These benefits could help self-employed parents to better balance work and family responsibilities and give them the opportunity to spend more time with their newly born or adopted children.
Providing $500 million over two years to extend EI income benefits for Canadians participating in longer-term training, hopefully benefit up to 10,000 workers.
Extending work-sharing agreements by 14 weeks, to a maximum of 52 weeks, so more Canadians can continue working and companies can avoid temporary or permanent layoffs.
Investing $500 million over two years in a Strategic Training and Transition Fund to support the particular needs of individuals who do not qualify for EI training, such as the self-employed or those who have been out of work for a prolonged period of time.
Increasing funding for training delivered through the Employment Insurance program by $1 billion over two years.
- Wage-Earner Protection Program: the WEPP currently provides guaranteed and timely payment of wages owed to eligible workers by a bankrupt employer, up to an amount equaling four weeks of maximum insurable earnings under the Employment Insurance Act. Budget 2009 will provide more protection to workers by extending the WEPP on an ongoing basis to also cover severance and termination pay, subject to the current maximum of four weeks of insurable earnings.
- Pension plans: The government has committed to engage in consultations on the legislative and regulatory framework for federally regulated pension plans with a view to making permanent improvements before the end of 2009. The consultation process is already underway. However, given the importance of some of the issues involved, the government will accelerate its timeline so that consultations will be completed within 90 days. In addition, the will assist the Office of the Superintendent of Financial Institutions in providing flexibility to supplement the temporary solvency funding relief proposed in the November 2008 Economic and Fiscal Statement.
- CPP review: To ensure that the CPP remains on solid footing, it is regularly reviewed by federal, provincial and territorial governments. Federal, provincial and territorial ministers of Finance expect to conclude their review of the CPP this year. The Government of Canada will work with the provinces and territories to implement any changes recommended in this review.
- Canada Child Benefit/National Child Benefit Supplement: The income levels on which income-testing of the base benefit under the Canada Child Tax Benefit (CCTB) and the National Child Benefit supplement (NCBs) are based will be increased in line with the increase in the upper limit of the lowest personal income tax bracket. Specifically, for the 2009-2010 benefit year, the income level at which the phase-out of the CCTB begins will increase to $40,726, and the income level at which the phase-out of the NCBs begins will increase by $1,894 such that it is completely phased out by $40,726 for the majority of families. These benefits are administered through the personal income tax filing process.
Training and developing a highly skilled workforce
- Providing $55 million over two years to help young Canadians find summer jobs.
- Supporting older workers and their families with an additional $60 million over three years for the Targeted Initiative for Older Workers and expanding it to include workers in small cities.
- Responding to skilled labour shortages with $40 million a year to launch the $2,000 Apprenticeship Completion Grant.
- Providing $50 million over two years for a national foreign credential recognition framework in partnership with provinces and territories.
- Investing an additional $100 million over three years in the Aboriginal Skills and Employment Partnership (ASEP) initiative, expected to support the creation of 6,000 jobs for Aboriginal Canadians.
- Investing $75 million in a two-year Aboriginal Skills and Training Strategic Investment Fund.
- Providing an additional $87.5 million over three years to temporarily expand the Canada Graduate Scholarships program.
- Allocating an additional $3.5 million over two years to offer an additional 600 graduate internships through the Industrial Research and Development Internship program launched in Budget 2007.
Business income tax measures
- There are no new corporate tax reductions, however, the amount of small business income eligible for the reduced federal tax rate of 11 percent increases from $400,000 to $500,000, as of January 1, 2009, and is pro-rated for corporations with taxation years spanning this date.
- Increasing access to credit for small businesses through proposed amendments to the Canada Small Business Financing Program and the Business Development Bank of Canada.
- Providing $30 million over two years for the Canada Business Network and $10 million to the Canadian Youth Business Foundation.
- Allocating $200 million over two years to the National Research Council’s Industrial Research Assistance Program to enable it to temporarily expand its initiatives for small and medium-sized businesses.
- Accelerated capital cost allowance for manufacturing and processing: The 2007 Budget introduced an accelerated 50% straight-line CCA rate for eligible manufacturing and processing machinery and equipment acquired before 2009. Budget 2008 extended this 50% straight-line rate to qualifying assets acquired before 2010 and provided for a reduced accelerated CCA rate for assets acquired thereafter. Budget 2009 proposes to maintain the 50% straight-line rate for assets acquired before 2012. The “half-year rule” will apply in all cases. Budget 2009 also proposes to eliminate import tariffs on a range of machinery and equipment.
- Accelerated CCA for computers: Computers are generally eligible for a 55% declining-balance CCA rate, subject to the half-year rule. Budget 2009 proposes, as a temporary measure, to increase the rate to 100% for eligible computer equipment acquired after January 27, 2009 and before February 2011. In addition, the half-year rule will not apply.
For more information on budget 2009, go to the Department of Finance Canada website at www.budget.gc.ca/2009/home-accueil-eng.html.
Yosie Saint-Cyr, LL.B., is managing editor at HRinfodesk.com–Canadian Payroll and Employment Law News.
Originally published in HRinfodesk–Canadian Payroll and Employment Law News and Developments
HRinfodesk is an information and news service that is published by First Reference, which includes employment law news for every jurisdiction in Canada, a Library of Articles, FAQs, a Calendar of Events, Important Dates and an HR Internet Directory for expanded research. Our search tools will help you to quickly find results by jurisdiction, topic, date, keyword and article number. Visit hrinfodesk.com for more information.