Now, this is taxing.
A government that has long fed us on perky little tax breaks for children’s swimming lessons, their parents’ bus passes and more has produced a budget that offers pretty well no tax relief for the masses. Taxes will actually go up in one instance – the excise duty on cigarettes will rise to $21.03 a carton of 200 from $17.
People anticipating income splitting for families and a doubling of the limit for tax-free savings accounts should check back 12 months from now, when the government introduces a budget it will take into the next election campaign. For now, the budget is most interesting as a document of how important the middle class has become in federal politics.
The government’s preferred term for this group is “consumers.” The word is used roughly 120 times in the budget document. (Okay, a few of those references are to the consumer price index, which measures inflation.) What’s actually being done for consumers? Mainly, the government will try to lean on businesses to lower prices, eliminate fees and improve disclosure to customers.
The budget will also address the use of some types of trusts and offshore vehicles by high-net-worth families to minimize taxes, boost a tax credit to help defray the costs of adopting a child, make it easier for people to include charitable giving in their estate planning and make it a little easier for some young people to qualify for student loans. Measures to prevent virtual currencies such as bitcoin from being used for money laundering or to finance terrorism were also announced.
Top consumer themes set out by the government: Get prices down for wireless phone services with legislative changes that will increase competition, and address the Canada-U.S. price gap on consumer goods with new laws to prevent unjustified price discrimination against Canadians.
The government figures higher prices in Canada may be explainable through our different safety standards or our comparatively small market. It aims to crack down on companies that charge more in Canada simply because they can. Unfortunately, the government’s timing is off on this one. The big decline in the Canadian dollar over the past year gives companies plenty of camouflage in charging more here.
The financial industry is also targeted in the budget’s pro-consumer measures. Charging customers a fee to receive a printed copy of their credit card statement will be prohibited. To improve disclosure, the government will require lenders to better explain collateral-charge mortgages, which differ from traditional mortgages in making it more expensive to switch banks. Banks will also be required to do a better job of helping clients understand the costs and benefits of using a power of attorney or joint account. For seniors, these measures can help keep your finances in order if you’re incapacitated.
Without outlining any specific concerns, the government also announced a review of Canada Deposit Insurance Corp. to ensure it adequately protects the savings of Canadians in light of lessons learned during the financial crisis and more recent banking developments. CDIC protects up to $100,000 in bank accounts and term deposits.
High-net-worth families are the focus of budget measures that will limit the tax benefit of having a deceased person’s assets moved into a financial structure called a trust. Income from assets in a trust would, with a few exceptions, eventually be taxed at the highest rate. The budget would also restrict use of a specialized form of income splitting used by higher-income Canadians in which income from a business or rental property is taxed in the hands of a minor.
Another measure of interest primarily to higher-income Canadians would make it easier to leave money to a charity after death. Basically, the tax break for a donation could be used against an individual’s taxes, or those on her estate.
Adoptive parents will benefit from an increase in the adoption tax credit to $15,000 from $11,774. The credit is designed to defray the costs of adopting a child and will be indexed to inflation for future years.
A small change on student loan rules will help more young people qualify for financial assistance. The budget would eliminate the value of cars and trucks owned by students in assessing whether they lack financial means and thus qualify for a loan.