CGA-Canada's 2006 Federal Budget Response
Budget Highlights
$20 billion in tax relief over two years, including:
- One per cent reduction in GST, effective July 2006.
- Broad-based income tax relief.
- Targeted tax measures to offset costs of tools, textbooks, transit passes and employment related expenses.
- Federal spending of $3.7 billion over two years for new $1,200 Universal Child Care Benefit.
- $1.5 billion this year for agriculture.
- $1.4 billion more this year for policing, border security and public safety.
- $1.1 billion more over two years to beef up Armed Forces.
Tax Measure Highlights
Personal income tax measures
- Basic personal amount to rise with indexation plus a permanent $100 increase in 2007.
- Permanent reduction in lowest personal income tax rate to 15.5 per cent from 16 per cent, effective July 1, 2006.
- Introduction of Canada Employment Credit, effective July 1, 2006, to provide credit of up to $500 on employment income, rising to $1,000 as of January 1, 2007.
- Universal Child Care Benefit to provide $100 a month for each child under age six.
- Changes to the dividend tax credit system -- provided provinces opt in -- for dividends paid by large corporations will effectively level playing field with income trusts.
- Introduction of tax credit covering public transit passes purchased monthly at minimum.
- Student benefits include a tax credit for textbook costs plus exemption of all scholarship and bursary income from taxation.
- Seniors’ pension income credit doubles to $2,000 a year.
- Elimination of capital gains tax on donations of publicly listed securities to public charities.
Sales and excise tax measures
- GST rate cut to six per cent from seven per cent, effective July 1, 2006. Transitional rules announced for transactions straddling effective date.
- Tobacco and alcohol excise taxes will increase to offset reduction in GST on those products.
- Removal of excise tax on jewelry as proposed in previous budget.
- Excise tax relief for vintners and small brewers to help them compete with larger producers.
Business income tax measures
- General corporate tax rate of 21 per cent will be reduced to 20.5 per cent in 2008, 20 per cent in 2009 and 19 per cent in 2010.
- Corporate surtax fully eliminated by January 1, 2008.
- Small business tax rate of 12 per cent to be applied to first $400,000 of income instead of first $300,000.
- Small business tax rate to fall to 11.5 per cent in 2008 and 11 per cent in 2009.
- Elimination of federal capital tax effective January 1, 2006, two years early.
Tax administration
- Canada Revenue Agency will be able to collect immediately on taxes owing instead of current requirement of waiting 90 days after notice of assessment to commence collection activities.
- The government confirms its intention to proceed with certain measures in Budget 2005:
- Tax credit for adoption expenses.
- Responding to recommendations of the Technical Advisory Committee on Tax Measures for Persons with Disabilities regarding eligibility criteria for the disability tax credit and the expenses eligible for the disability supports deduction.
- Expanding list of expenses eligible for medical expense tax credit.
- Doubling amount of disability related medical expenses claimable by a caregiver.
- Implementing changes to capital cost allowance system for certain assets.
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