Canada’s New Government Provides Tax Relief for Canadian Families and Businesses

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The following News Release or Speech has just been posted on the Finance Canada Site.

Ottawa, March 27, 2007
2007-026

The Honourable Jim Flaherty, Minister of Finance, today tabled a Notice of Ways and Means Motion in the House of Commons to implement certain tax relief measures proposed last week in Budget 2007 and in the months before the budget.

“Canadians pay too much tax,” said Minister Flaherty. “Budget 2007 builds on the significant tax relief in our first budget to help Canadian families and businesses get ahead and stay ahead. We are reducing taxes by more than $40 billion over this and the next two fiscal years and we will continue to look at new ways to ease the tax burden of hard-working Canadians.”

Key measures in the Notice include:

* Introducing a $2,000 child tax credit that will provide up to $310 per child of tax relief to more than 3 million Canadian families, effective January 1, 2007.

* Increasing the spousal and other amounts, which will provide up to $209 of tax relief for a supporting spouse or single taxpayer who is supporting a child or relative, effective January 1, 2007.

* Enacting the Tax Fairness Plan, which delivers over $1 billion in additional tax savings for Canadian pensioners and seniors including:

>> * Increasing the age credit amount by $1,000 to $5,066, effective January 1, 2006.
>> * Introducing pension income splitting, effective January 1, 2007.
>> * Reducing the general corporate income tax rate by one-half percentage point, effective January 1, 2011.
>> * Introducing a distribution tax on distributions from certain publicly-traded income trusts and limited partnerships, generally effective beginning in 2011 for previously existing trusts and partnerships and in 2007 for new trusts and partnerships.

* Doubling the value of goods that may be imported duty- and tax-free by returning Canadian residents after a 48-hour absence from Canada to $400 from $200, effective March 20, 2007.

* Making registered education savings plans more responsive to the needs of students by eliminating the $4,000 limit on annual contributions, increasing the lifetime contribution limit to $50,000 from $42,000, and increasing the maximum Canada Education Savings Grant annual amount to $500 from $400, effective January 1, 2007.

* Increasing the age limit from 69 to 71 for converting a registered retirement savings plan (RRSP) to strengthen incentives for older Canadians to work and save, effective January 1, 2007.

* Amending the list of qualified investments that can be held by RRSPs and other registered plans to include most investment-grade debt and publicly-listed securities, effective March 19, 2007.

* Establishing a federal Foreign Convention and Tour Incentive Program to attract foreign conventions and tour groups through a goods and services tax/harmonized sales tax rebate, effective April 1, 2007.

* Introducing a Green Levy on fuel-inefficient vehicles in Canada, effective March 20, 2007.

The Notice can be viewed free of charge on the Department of Finance website. Printed copies can be purchased for $10 from the Department of Finance Distribution Centre at (613) 995-2855.

Further information on Budget 2007 is available on the Department of Finance website.

___________________________________
For further information, media may contact:

Chisholm Pothier
Press Secretary
Office of the Minister of Finance
613-996-7861

David Gamble
Media Relations
Department of Finance
613-996-8080

SOURCE: Dept of Finance News

RELATED DOCUMENT: Notice of Ways and Means Motion to Implement Certain Provisions of the Budget Tabled in Parliament on March 19, 2007 Budget Implementation, 2007

Comments

Geoffrey Laxton says:

* Enacting the Tax Fairness Plan, which delivers over $1 billion in additional tax savings for Canadian pensioners and seniors including:

o Increasing the age credit amount by $1,000 to $5,066, effective January 1, 2006.

o Introducing pension income splitting, effective January 1, 2007.

o Reducing the general corporate income tax rate by one-half percentage point, effective January 1, 2011.

o Introducing a distribution tax on distributions from certain publicly-traded income trusts and limited partnerships, generally effective beginning in 2011 for previously existing trusts and partnerships and in 2007 for new trusts and partnerships.

The first is a miniscule tax savings, the second delivers a maximum $800 per senior with a spouse, the third is hard to understand as a tax savings for Canadian pensioners and seniors, and the fourth halloween massacre delivered an evil, vindictive, nasty, and brutish loss of $35 billion to millions of pensionsers and seniors.

Where is the tax fairness?

I think the “tax fairness” refers to the ‘Official Tax Fairness Plan’ as the so-called “NEW” government mentioned October 31 and in Dec/2006… (e.g. it’s just a title to them, versus an adjective or real meaning to us)

About the Pension splitting ..

Pension income splitting for pensioners:

The tax fairness plan includes a new mechanism for pension income splitting, which will take effect on January 1, 2007. Canadian residents who receive income that currently qualifies for the existing pension income tax credit will now be allowed to allocate to their resident spouse or common law partner up to one-half of that income. For income tax purposes, the amount allocated will be deducted in computing the income of the transferor, and included in computing the income of the party to whom the pension income is allocated.

For individuals aged 65 and over, eligible pension income includes lifetime annuity payments from a registered pension plan, a registered retirement savings plan (RRSP) or a deferred profit sharing plan (DPSP), as well as payments out of or under a registered retirement income fund (RRIF). For those under age 65, eligible pension income includes lifetime annuity payments under a registered pension plan as well as certain payments received on the death of the individual’s spouse or common law partner.

Previously, you could split your Canada Pension and Old Age Pension, but that was it .. I know this benefits some of my clients

Personally .. I chuckle every time I see a news release starting with .. “CANADA’s NEW GOVERNMENT…” blah blah blah

Geoffrey Laxton says:

“Q: How will seniors and pensioners benefit under the Tax Fairness Plan?

A: The Tax Fairness Plan proposes to deliver more than $1 Billion in tax reductions annually for Canadians by significantly increasing the Age Credit – retroactive to January 1, 2006 and permitting couples with eligible pension income to reduce their combined taxes by transferring income to the lower-earning spouse.

Q: What levels of tax reductions can individuals expect under the plan?

A: The level of reductions under the Plan’s proposed measures will vary based on the particular circumstances of individuals and couples.

For example, the increase in the age credit amount would raise the maximum tax relief available under the credit to almost $800 per individual and more than $400 million in total for 2006. However, to target relief to low- and middle-income seniors, the maximum amount is available only to those seniors with net incomes below $30,270 and the credit is fully phased out when net income reaches $64,043.

With regard to pension splitting, the amount by which a couple’s total income taxes would be reduced depends on things such as how much pension income a couple earns, whether both partners earn pension income and in what province they reside. In total, $675 million of tax relief is anticipated under the pension splitting measure for the 2007 taxation year.”

How does saving a maximum of $800 per pensioner compare to the loss in equity of thousands of dollars in income trust equity in a RRIF account? How does “$675 million of tax relief anticipated under the pension splitting measure for the 2007 taxation year” compare to the $35 billion loss in income trust equity?

This is a sham of the highest order!

Oh~ When you put it like that 🙂

So .. what’s the answer? Is this an Income Trust issue? Or a pensioner issue?

Geoffrey Laxton says:

How many will actually benefit from Flaherty’s discriminatory pension income splitting scheme?
1. Of the 30% of seniors who receive a pension I would say maybe as many as one quarter are widows/widowers, single, divorced, separated. That brings down the number of eligible seniors to 22.5%.
2. Of the 22.5% who are eligible as many as 25% may have spouses who have significant income of their own and who may be in a tax bracket not too different from the spouse receiving the eligible pension income. In their case there will be little or no tax reduction resulting from pension income splitting. We are down to 16.7% of seniors receiving a pension.
3. Many of the remaining seniors receiving a pension but who had low paying jobs are in the lowest tax brackets and pension income splitting with a spouse/partner receiving OAS will not mean very much if anything.
4. All factors taken into consideration pension income splitting may not be of any useful benefit to more than maybe 12-14% of seniors.
5. Of those the ones who will benefit the most are seniors with fat pensions and stay at home spouses/partners. A retired federal judge or a retired deputy minister with a pension of over $100,000. with a stay at home spouse with no significant income will benefit handsomely.
Question: What will be the real cost of this discriminatory scheme be for the government? ANSWER: Most likely a fraction of the big numbers Flaherty will announce in his budget.

Okay .. now you are just copy/paste’ing from your previous comments over at either Garth’s site or another one you’ve posted.

Geoffrey – You’ve got the floor. If you write an original post with a point and conclusion, email it to me – and I’ll post it in the main blog – not here in the comments.

Take care! HART

Geoffrey Laxton says:

You are right. I posted it at Garth’s blog. Yves Fortin wrote the last piece. The point is that only those seniors who are over 65 and have a spouse can pension income split. I don’t think that this will make up for the loss in equity for a single senior whose spouse died. Jack Mintz has repeatedly said that the only way to make the taxation of income trust distributions or corporate dividends fair for RRSP/RRIF accounts is to allow a tax credit in these accounts which Flaherty didn’t actually do. I will email you the rest of what I have to say. Thank you for your feedback. It is certainly better than what , for example, some Conservative bloggers have had to say. Geoffrey

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