A C o n t i n u i n g R e c o r do f Ta x R e l i e f

J U N E 2 0 0 9

Governmentof Canada

Gouvernementdu Canada

A C o n t i n u i n g R e c o r do f Ta x R e l i e f

J U N E 2 0 0 9

© Her Majesty the Queen in Right of Canada (2009)All rights reserved

All requests for permission to reproduce this documentor any part thereof shall be addressed to

Public Works and Government Services Canada.

WWW.ACTIONPLAN.GC.CACette publication est aussi disponible en français.

Cat. No.: F2-189/2-9-2009E ISBN 978-1-100-12854-2

A Continuing Record of Tax Relief

3

Canada’s Economic Action PlanMany Canadian communities, businesses and workers have beenseriously affected by the economic slowdown. That is why ourGovernment brought forward Canada’s Economic Action Plan. It isa clear blueprint to stimulate the economy, protect Canadian jobsand support those hit hardest. It is delivering $62 billion in stimulus,among the largest of the Group of Seven (G7) economies.

The Government is delivering on Canada’s Economic Action Plantoday, when it is needed the most. It will provide a boost to outputand employment. It is an investment in our future.

The Plan:• Reduces taxes permanently.

• Helps the unemployed through enhancedEmployment Insurance and training programs.

• Avoids layoffs by enhancing the EmploymentInsurance work-sharing program.

• Creates jobs through a massive injection of infrastructure spending.

• Helps create the economy of tomorrow by improving infrastructureat colleges and universities and supporting research and technology.

• Supports industries and communities most affectedby the global downturn.

• Improves access to and the affordability of financing Canadianhouseholds and businesses.

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Canada’s Economic Action Plan

Tax reductions are an essential element of Canada’s Economic Action Plan.They support Canadian businesses and jobs in the short term by providingup-front stimulus, which helps individuals and businesses to weatherthe global recession, and also create a long-term advantage for sustainedeconomic and employment growth. The Plan includes measures that willreduce the tax burden for Canadian families and businesses by more than$20 billion over 2008–09 and the following five fiscal years.

Tax Relief for CanadiansCanada’s Economic Action Plan provides tax relief to Canadians by:

• Increasing the basic personal amount and the top of the two lowestpersonal income tax brackets. This allows Canadians to earn moreincome before paying federal income taxes or before being subjectto higher tax rates.

• Effectively doubling the tax relief provided by the Working IncomeTax Benefit (WITB). This encourages low-income Canadians to findand keep a job.

• Increasing the Age Credit amount by $1,000. For low- and middle-income seniors, this means additional annual tax savings of up to $150,making retirement more affordable.

To make raising children more affordable, the Plan also announcedan increase in the income level at which the National Child BenefitSupplement for low-income families and the base benefit of the CanadaChild Tax Benefit are phased out.

Canadians are already benefiting from many of these measures: • Individuals have been seeing the benefits of income tax reductions

on their paycheques since April 2009.

• Increased child benefits will start to flow in July, providingup to $436 for a family with two children.

• Tax relief for low- and middle-income seniors has been put in place,providing up to an additional $150 in annual tax savings.

• The Government expects that low-income working Canadians will receivebenefits from the enhanced WITB when they file their 2009 tax returns.

Personal Tax Relief for CanadiansBeverly earns $35,000 and is a single parent of two children. In total, herpersonal income taxes have been cut by three-quarters, or $1,216, and shereceives an additional $436 in child benefits, making her $1,652 better off.

Canada’s Economic Action Plan: Tax Relief for Canadians

Personal Tax Relieftotal relief (dollars)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Economic Action Plan Previous actions Total

$1,652

$1,150

$502

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A Continuing Record of Tax Relief

Canada’s Economic Action Plan

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“These tax changes will put money back in the pockets of Canadians,boosting confidence and encouraging spending, which is critical to the retailsector and Canada’s overall economic recovery.”

—Diane J. Brisebois, President and CEO, Retail Council of Canada, January 28, 2009

Personal Tax Relief for CanadiansMatthew and Giuliana have two children, and Matthew’s income is $90,000.In total, their personal income taxes have been cut by 11 per cent, or $1,532,and they receive $76 in additional child benefits, making them $1,608 better off.

Canada’s Economic Action Plan: Tax Relief for Canadians

Personal Tax Relieftotal relief (dollars)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Economic Action Plan Previous actions Total

$1,182

$426

$1,608

A Continuing Record of Tax Relief

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Support for Home Ownership and theHousing Industry Canada’s Economic Action Plan provides up to $7.8 billionover two years to support homeowners and the housingindustry, while protecting and creating jobs. These measuresare already delivering benefits to Canadians.

The stimulus incentives of the temporary Home RenovationTax Credit (HRTC) are helping to sustain the housingindustry during the global economic recession.The Government expects the 15-per-cent HRTC to providean estimated $3 billion in tax relief to about 4.6 millionCanadian families.

In addition, two other measures are also available for the2009 and future tax years:

• To provide first-time home buyers with additional accessto their Registered Retirement Savings Plan savings forpurchasing or building a home, the Home Buyers’ Plan(HBP) withdrawal limit has been increased to $25,000from $20,000, the first increase in the withdrawal limitsince the HBP was introduced in 1992.

• To assist first-time home buyers with the costs related tothe purchase of a home, the First-Time Home Buyers’ TaxCredit is now providing up to $750 in tax relief.

Tax Relief to Stimulate Business InvestmentThe measures contained in the Economic Action Plan build on theGovernment’s record of continuous tax relief, enabling Canadian businessesto emerge stronger and better equipped to compete worldwide as the globaleconomy recovers.

Reducing Taxes for Small BusinessesThe Economic Action Plan strengthens the Government’s effort to supportthe growth of Canada’s small businesses.

Canada’s Economic Action Plan increased the amount of small businessincome eligible for the reduced federal income tax rate of 11 per cent to$500,000 from $400,000. This higher threshold will help small businessesretain more of their earnings for reinvestment and put them in a positionto succeed despite today’s uncertainty. This increase has been in effectsince January 1, 2009.

Thanks to the Economic Action Plan:• All Action Plan measures supporting home renovations and improvements

are already delivering benefits to Canadians and creating activity and jobsin the housing industry.

• The Canada Revenue Agency has received over 700,000 HRTC-relatedenquiries through its website and by telephone, and high-profile advertisingcampaigns undertaken by major building material suppliers and retailershave also helped increase awareness of the HRTC.

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Canada’s Economic Action Plan

Extending Assistance for Canada’s Manufacturingand Processing IndustriesThere are special challenges facing Canada’s manufacturing and processingindustries, and our Government has taken steps in Canada’s EconomicAction Plan to help. The Plan extended the temporary 50-per-centstraight-line accelerated capital cost allowance (CCA) rate to investmentsin manufacturing or processing machinery and equipment made in 2010and 2011. Manufacturers and processors are already benefiting fromthis measure, which was introduced in Budget 2007 and extendedin Budget 2008.

Temporary 100-Per-Cent Capital CostAllowance Rate for ComputersTo help businesses adopt new technology at a faster pace, the Governmentintroduced a temporary two-year 100-per-cent CCA rate for computers.The measure has been in effect since January 28, 2009.

Attracting New InvestmentTax Rate¹ on New Business Investmentin Canada, 2012

per cent

5

10

15

20

25

30

35

1 Excludes resource and financial sectors and tax provisions related to research and development.2 Measures announced as of April 30, 2009, including Ontario's decision to harmonize its retail sales tax with the federal Goods and Services Tax.3 In the case of New Brunswick, the combined federal-provincial corporate income tax rate is scheduled to be below 25%.4 Excludes Canada.Source: Department of Finance Canada.

CanadaPrior to the 2006 budget

CanadaIncluding measures in 2009

federal and provincial budgets2

CanadaProvincial retail sales

tax harmonization plus federal-provincial corporate

income tax rates to 25%3

United States

OECD average4

18.2

14.5

0

Second-lowestMETR amongG7 countries

32.5

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A Continuing Record of Tax Relief

Canada’s Business Tax AdvantageAs a result of the tax relief introduced by this Government, Canadais better positioned than most to withstand the effects of today’s globaleconomic challenges.

At the same time, lessening the tax burden on Canadian businesses buildsa solid foundation for future economic growth and higher living standardsfor Canadians. Substantial, broad-based tax reductions are loweringthe general corporate income tax rate from 22.12 per cent (includingthe corporate surtax) in 2007 to 15 per cent by 2012 to strengthenCanada’s business tax advantage.

Collaboration for Improved BusinessTax CompetitivenessIn addition to the significant federal tax relief introduced to positionCanadian businesses for success, our Government is working with provincesand territories to put the country’s businesses in a more competitive positionas the economy recovers. Areas of focus include:

• Encouraging provincial and territorial governments to reduce theircorporate income tax rates to achieve a combined federal-provincial-territorial statutory tax rate of 25 per cent by 2012, and to eliminatetheir capital taxes. Several provinces have acted to enhance Canada’sbusiness tax advantage by doing just that, building on significant actionsalready taken at the federal level.

• Harmonizing provincial retail sales taxes with the federal Goods andServices Tax. Ontario’s 2009 budget announcement to join theHarmonized Sales Tax Framework represented a significant step forward.Ontario’s plan will double the proportion of the Canadian economy thatis free from sales tax on business inputs, with 80 per cent of the economyoperating in this more business-friendly tax environment.

As a result of the corporate income tax reductions introduced since 2006,Canada will have the lowest statutory tax rate in the G7 by 2012 andwill reach the goal of the lowest overall tax rate on new business investmentin the G7 by 2010.

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Canada’s Economic Action Plan

For more information on Canada’s Economic Action Plan, visit

WWW.ACTIONPLAN.GC.CA

or call

1 800 O-Canada (1-800-622-6232)1-800-926-9105 (TTY)

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A Continuing Record of Tax Relief