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Archived - Chapter 3 - Building a Better Canada:
Families and Communities
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Budget 2006 provides $5.2 billion over two years in increased support for Canadians and their families.
Canada's Universal Child Care Plan
- $3.7 billion over two years for the Universal Child Care Benefit (UCCB), which will provide all families with $100 per month for each child under age 6. The UCCB will not affect federal income-tested benefits and will be provided as of July 1, 2006.
- $250 million to support the creation of new child care spaces. The goal is to create 25,000 additional spaces each year.
Other Family Measures
- A children's fitness tax credit for up to $500 in eligible fees for physical fitness programs for each child under age 16.
- Assistance for persons with disabilities will be enhanced by:
- Increasing the maximum annual Child Disability Benefit (CDB) to $2,300 from $2,044, effective July 2006.
- Extending eligibility for the CDB to middle- and higher-income families caring for a child who is eligible for the disability tax credit, effective July 2006.
- Boosting the maximum amount of the refundable medical expense supplement to $1,000 from $767, effective 2006.
- $52 million per year for the Canadian Strategy for Cancer Control.
- Increasing to $2,000 the maximum amount eligible for the pension income credit, effective 2006. This will benefit nearly 2.7 million taxpayers with pension income and will remove approximately 85,000 pensioners from the tax rolls.
Budget 2006 provides almost $3 billion over two years to help make our communities better places to live.
- Reducing the Right of Permanent Residence Fee from $975 to $490, effective immediately.
- Increasing immigration settlement funding by $307 million and taking steps towards the establishment of a Canadian agency for the assessment and recognition of foreign credentials.
- Confirming up to $800 million to provinces and territories to address immediate pressures in affordable housing.
- $450 million for improving water supply and housing on reserve, education outcomes, and socio-economic conditions for Aboriginal women, children and families.
- Confirming up to $300 million to provinces to address immediate pressures in off-reserve Aboriginal housing, and up to $300 million to territories for affordable housing in the North.
- A tax credit for the purchase of monthly public transit passes, effective July 1, 2006.
- Accelerating the capital cost allowance for forestry bioenergy.
- $5.5 billion over four years for a new Highways and Border Infrastructure Fund, Canada's Pacific Gateway Initiative, the Canada Strategic Infrastructure Fund, the Municipal Rural Infrastructure Fund and a Public Transit Capital Trust.
- Exempting donations of publicly listed securities to public charities from capital gains tax, effective immediately.
- Exempting donations of ecologically sensitive land made under the Ecogift program from capital gains tax, also effective immediately.
- $50 million to the Canada Council for the Arts.
- Providing temporary solvency funding relief to help re-establish full funding of federally regulated defined benefit pension plans in an orderly fashion, with safeguards for promised pension benefits.
The Government recognizes the important contribution families and communities make to the country's well-being, and is committed to meeting the needs and interests of families and building stronger communities.
Strong families are the cornerstone of a sound and prosperous society and are key to ensuring a bright future for Canada.
However, Canadian families are changing and face many new challenges. Work arrangements for both men and women are more complex and varied than ever before. In particular, families with young children must strike a difficult balance between work and family life. Families are also concerned about income security for their elders and having timely access to health care when they need it.
In response, government programs and policies must evolve in order to provide more choice and flexibility to individuals and families in a way that reflects their different needs and circumstances.
One of the most important investments governments can make is to support families as they raise their children. That is why Budget 2006 announces the kind of investments that will make a real difference to parents, by providing more choice in child care for families with young children. As a result of these budget measures, total direct federal support to families will be approximately $11.7 billion for the 2006–07 benefit year, with the vast majority of benefits directed to low- and middle-income families.
Budget 2006 proposes to introduce the new Universal Child Care Benefit (UCCB), to provide all families with $100 per month for each child under age 6, effective July 1, 2006. Through the proposed UCCB, parents will be able to choose the child care option that best suits their families' needs—whether that means formal child care, informal care through neighbours or relatives, or a parent staying at home.
Amounts received under the UCCB will be taxable in the hands of the lower-income spouse.
All families with a child under the age of 6 will be eligible:
- Families who receive the Canada Child Tax Benefit (CCTB) will receive the UCCB automatically.
- Families who do not receive the CCTB will be able to apply for the UCCB by submitting a completed CCTB application form to the Canada Revenue Agency.
Budget 2006 proposes that amounts received under the UCCB not reduce benefits paid under the CCTB and the goods and services tax credit. The UCCB will also not be considered income for the purposes of federal income-tested programs delivered outside of the income tax system, such as the Guaranteed Income Supplement, the Canada Education Savings Grant, the Canada Learning Bond and Employment Insurance.
In addition, the UCCB will not reduce the amount that can be claimed under the child care expense deduction, which recognizes the out-of-pocket child care costs incurred by families.
With the creation of the UCCB, Budget 2006 proposes to phase out the existing CCTB under-7 supplement as of June 30, 2006, for children under the age of 6. The current under-7 supplement will remain in place until June 30, 2007, for children who turn 6 before that date. This two-stage phase-out will ensure that once the UCCB is in place, all families currently receiving the supplement will be at least as well off as they were under the current system, and that most families will receive significantly more benefits.
The UCCB will substantially increase federal assistance for children by providing direct federal support to approximately 1.5 million families and over 2 million children. Direct federal benefits to families with children will be provided through the UCCB and two components of the CCTB: the base benefit, which is targeted to low- and middle-income families, and the National Child Benefit (NCB) supplement, which provides additional assistance to low-income families.
Direct Federal Support to Families With Children, 2006–07 Benefit Year1
|Family net income||NCB supplement||CCTB base benefit2||UCCB3||Total|
(billions of dollars)
|$50,000 – $100,000||0||1.5||0.9||2.4|
|1 Benefit year from July 1, 2006 to June 30, 2007.
2 The amounts shown in respect of the CCTB base benefit reflect the proposed phase-out of the CCTB under-7 supplement.
3 Does not include savings from rolling the CCTB under-7 supplement into the UCCB.
Chart 3.7 shows net direct federal benefits received by a typical two-earner family with two children at different income levels from the UCCB, the CCTB base benefit and the NCB supplement:
- A family with an income of $20,000 will receive over $7,300 in net benefits.
- A family with an income of $50,000 will receive over $2,800 in net benefits.
- A family with an income of $100,000 will receive over $800 in net benefits.
The UCCB will be universal and it will provide direct financial support to low-income families with young children without increasing the disincentives to work that arise due to the income-tested nature of some benefits.
The introduction of the UCCB and elimination of the CCTB under-7 supplement will have a federal cost of about $1.6 billion in 2006–07 and $2.1 billion in 2007–08.
The availability of quality child care is a challenge for many working parents—a challenge the Government aims to address in cooperation with provinces and territories, employers and community non-profit organizations.
To support the creation of child care spaces, this budget sets aside $250 million per year, beginning in 2007–08. The Government will consult to ensure that assistance is effective in creating additional child care spaces, responsive to the needs of parents and administered in an efficient and accountable manner. Key issues for these consultations will include:
- Different delivery approaches that could be used to provide support, such as grants or tax credits and how to best deliver assistance to tax-exempt organizations.
- The unique needs of small businesses and rural communities, as well as large businesses and cities.
- The types of start-up and equipment costs associated with creating child care spaces through new facilities or the expansion of existing facilities that should be eligible for the assistance.
Further information on the consultation process will be provided following the budget.
Finally, consistent with the provisions of the existing Early Learning and Child Care (ELCC) agreements with provinces, which allow for their termination upon one year's notice by either party, the Government indicated in February 2006 that it is phasing out the agreements at the end of March 2007. The Government will provide $650 million in 2006–07 to all provinces and territories, to be distributed on an equal per capita basis.
Promoting Physical Fitness Among Children
Studies show that regular physical activity has many positive effects on children, including healthier growth and development and improved physical fitness. At the same time, the escalating costs of organized sports makes it difficult for many parents to afford these activities.
To promote physical fitness among children, Budget 2006 proposes to introduce a children's fitness tax credit, effective January 1, 2007. The credit will be provided on up to $500 of eligible fees for programs of physical activity for each child under age 16. In the coming months, the Government will establish a small group of experts in health and physical fitness to provide advice on the programs of physical activity that should be eligible for the credit.
It is estimated that this measure will reduce federal revenues by $40 million in 2006–07 and $160 million in 2007–08.
The Government is committed to developing a new policy to guide decisions on hosting international amateur sport events in Canada. Hosting international sporting events has significant social, cultural and economic benefits. A new hosting policy framework will assist governments and the sports community to plan ahead and systematically maximize these benefits.
In April 2003, the Technical Advisory Committee on Tax Measures for Persons with Disabilities was established to provide advice on how to address issues related to tax measures for persons with disabilities.
The committee released its final report, Disability Tax Fairness, in December 2004. It made 25 policy and administrative recommendations focusing on three key areas:
- Eligibility criteria for the disability tax credit (DTC), including extending eligibility for the credit and recommendations to improve its administration.
- Recognition of expenses incurred to pursue employment or education, including the creation and expansion of a disability supports deduction and an increase in the maximum amount of the refundable medical expense supplement.
- Measures for caregivers and children with disabilities, including an increase in the maximum Child Disability Benefit.
This government endorses the work of this committee. Budget 2006 therefore proposes to fully implement their policy recommendations and go beyond by:
- Increasing the maximum annual Child Disability Benefit (CDB) to $2,300 from $2,044 effective July 2006. The CDB is a supplement of the CCTB payable in respect of children in low- and modest-income families who meet the eligibility criteria for the DTC.
- Extending eligibility for the CDB to middle- and higher-income families caring for a DTC-eligible child, including virtually all families that are currently eligible for the CCTB base benefit, effective July 2006.
- Increasing the maximum amount of the refundable medical expense supplement (RMES) to $1,000 from $767 for the 2006 taxation year. The RMES improves work incentives for Canadians with disabilities by helping to offset the loss of coverage for medical and disability-related expenses under social assistance when recipients move into the labour force.
Enhancements to the CDB will increase the benefits paid to all families currently receiving the CDB, and will extend eligibility for the CDB to over 95 per cent of families caring for children with severe disabilities. It is estimated that these enhancements will provide benefits of $35 million in 2006–07 and $45 million in 2007–08.
Increasing the maximum amount of the RMES will provide benefits of $15 million in 2006–07 and $10 million in 2007–08 for Canadians with disabilities.
An important consideration for parents and grandparents of a child with severe disabilities is how best to ensure the financial security of their child, when they are no longer able to provide support. The Minister of Finance will appoint a small group of experts to examine ways to help parents save for the long-term financial security of a child with severe disabilities, and provide their recommendations to the Minister within six months.
Cancer is a major health issue for Canadians. Every year, hundreds of thousands of Canadians are diagnosed with or die of cancer. It affects not only those with cancer, but also their families, friends and colleagues. As well, this disease affects all Canadians in terms of the economy and communities, and in increased health care costs.
This budget provides $52 million per year to the Public Health Agency of Canada and Health Canada to allow them to work with partners towards implementing the Canadian Strategy for Cancer Control. The Canadian Strategy for Cancer Control was developed by non-governmental cancer organizations in collaboration with the federal government, provinces and territories.
This investment will help improve screening, prevention and research activities, and enhance coordination among the federal government, cancer advocacy groups, and the provinces and territories.
Pensions—Providing Greater Tax Relief to Pensioners
A deduction for the first $1,000 in eligible pension income was introduced in 1975. The deduction was converted to a non-refundable credit in the 1987 tax reform. The maximum amount of pension income that can be claimed under this measure has been left unchanged at $1,000 since its introduction.
To provide greater tax assistance to those who have saved for their retirement, Budget 2006 proposes to increase to $2,000 the maximum amount of eligible pension income that can be claimed under the pension income credit, effective for the 2006 and subsequent taxation years. This measure will benefit nearly 2.7 million taxpayers receiving eligible pension income—providing up to $155 per pensioner—and will remove approximately 85,000 pensioners from the tax rolls.
It is estimated that this measure will reduce federal revenues by $490 million in 2006–07 and $405 million in 2007–08.
Pensions—Private Defined Benefit Plans
Canada has a diversified retirement income system based on a mix of public and private pensions. The two public pension pillars (Old Age Security/Guaranteed Income Supplement and the Canada and Quebec Pension Plans) of Canada's three-pillar retirement income system ensure a minimum level of income in retirement for Canadian seniors. The third pillar, tax-deferred private retirement savings, includes registered retirement savings plans and registered pension plans. These plans provide Canadians with incentives to save for retirement and help bridge the gap between public pension benefits and their retirement income goals.
Most pension plans are either defined contribution (DC) or defined benefit (DB) plans. Under DC plans, plan sponsors and, in most cases, the employees, make contributions to an account for each member. Benefits are based on the contributions plus any investment income, expenses, gains and losses. Under DB pension plans, employers and employees make contributions but the level of promised benefits is not a function of investment income. Instead, employers promise to deliver benefits based on the employee's earnings and years of service, providing a predictable retirement income.
While private pension plans are voluntary, they must generally be registered, either federally or provincially. One of the main purposes of regulation is to set out standards for funding and investment of pension plans to ensure that the rights and interests of pension plan members, retirees and their beneficiaries are protected. In particular, regulation is intended to ensure that pension plan assets are sufficient to meet pension plan obligations.
In May 2005, the Department of Finance Canada released the consultation paper, Strengthening the Legislative and Regulatory Framework for Defined Benefit Pension Plans Registered Under the Pension Benefits Standards Act, 1985 to consult on means to enhance benefit security and the viability of DB pension plans. The Department received a broad range of views from stakeholders including plan sponsors, labour representatives, retirees, actuaries and individual Canadians, with many submissions suggesting that there are structural issues affecting the security and viability of DB pension plans. Other jurisdictions also share these challenges.
In the context of these consultations, stakeholders also stressed that the funding status of private DB pension plans is a key immediate issue affecting many workers, retirees and pension plan sponsors. The decline in long-term interest rates has increased pension liabilities and led to significant solvency deficits for many plans. A solvency deficit is the amount by which a pension plan's liabilities exceed its assets, using certain actuarial calculations. Recent changes in actuarial standards have further increased the estimated pension plan liabilities and correspondingly added to pension deficits. Last year, the Office of the Superintendent of Financial Institutions (OSFI) estimated that as of June 30, 2005, 72 per cent of federally regulated DB pension plans had a solvency deficit. OSFI's estimates revealed that federally regulated DB pension plans were 91 per cent funded, on average, as at June 30, 2005, compared to 100 per cent as at December 31, 2004.
The Pension Benefits Standards Act, 1985 and the Pension Benefits Standards Regulations, 1985 require solvency deficits to be funded over five years. Many plan sponsors, while committed to funding their plans, have raised the concern that the recent large funding requirements are driving excessive cash flow away from expenditures that could enhance productivity and competitiveness and benefit the economy more generally. Some financially vulnerable companies say these obligations are creating significant financial stress and could affect their ongoing viability. Ultimately, such challenges may weaken pension plans and benefit security.
The Government will propose four temporary measures to provide solvency funding relief in response to these difficult circumstances. This will help re-establish full funding of federally regulated DB pension plans in an orderly fashion while providing safeguards for promised pension benefits. The options include:
- Consolidate solvency payment schedules: Plan sponsors will be permitted to consolidate solvency payment schedules and amortize the entire solvency deficit existing over a single, new, five-year period. This will have the effect of smoothing outstanding solvency payment obligations through five equal payments over the next five years.
- Extend the solvency funding payment to 10 years with buy-in: Plan sponsors will be permitted to extend the period for making solvency funding payments to 10 years from 5 years, subject to a condition of buy-in by plan members and retirees. Plan sponsors will be required to demonstrate that plan members are fully informed and that no more than one-third of current plan members or retirees object to the change.
- Extend the solvency funding payment to 10 years with letters of credit: Plan sponsors will be permitted to extend the period for making solvency funding payments to 10 years when the difference between the 5-year and 10-year level of payments is secured by a letter of credit. This will reduce payments for sponsors while protecting pension benefits.
- Extend the solvency funding payment period to 10 years for agent federal Crown corporations: Agent federal Crown corporations will be permitted to extend the period for making solvency funding payments to 10 years subject to terms and conditions that will ensure a level playing field.
The temporary funding relief would only be available to plan sponsors whose funding payments are up-to-date and only available for the first valuation report filed with OSFI before 2008. The detailed funding relief measures and terms and conditions for their application will be set out in draft regulations that will be pre-published for comment shortly in Part I of the Canada Gazette.
The Government will continue to monitor DB pension plans, analyze the submissions from the consultation, and consider further action as necessary.
Canada's economic success rests on the strength of its communities. The Government of Canada is dedicated to making Canadian communities a better place to work, to learn and to grow.
Budget 2006 will help immigrants join in the economic life of their new communities by reducing the Right of Permanent Residence Fee, providing more resources for settlement and integration, and supporting steps to ensure that skilled immigrants are able to work in their field of expertise.
The Government is working to improve communities by promoting affordable housing and investing in housing for Aboriginal people living off reserve and in the territories, where housing pressures are particularly acute.
The Government will consult with Aboriginal leaders and provinces and territories to develop a new approach to meet the targets agreed upon at the fall 2005 First Ministers meeting with national Aboriginal leaders.
Increased federal support for infrastructure will also contribute to the economic vitality of communities by helping to ensure that citizens have access to safe and reliable water systems, that goods can be transferred efficiently to markets, and that traffic congestion is reduced, contributing to an improved environment. Additional investments to encourage the use of public transit will further help communities improve their quality of life.
Finally, enhanced tax assistance for charitable giving will help build a stronger sense of community across the country.
Canada has a long tradition of welcoming immigrants. The Government recognizes the importance of ensuring that newcomers have every possible opportunity to realize their dreams for the future.
This budget delivers on the Government's commitment to reduce the Right of Permanent Residence Fee to help immigrants and their families with the costs of starting a new life in Canada. The fee will be reduced from its current level of $975 to $490 effective on May 2, 2006. In addition, the Government will provide partial refunds to those who have already paid the $975 fee but have not been granted permanent resident status or have not yet arrived in Canada. The cost of this initiative in foregone revenue is $224 million over two years.
Settlement and Integration
Newcomers to Canada often face challenges integrating into a new country, community and labour market. Settlement and integration programs that provide services such as language instruction and employment-related support help immigrants overcome the stresses of moving to a new country. In keeping with the Government's commitment to provide additional resources for settlement and integration, this budget provides $307 million over two years, over and above investments provided in recent budgets, to enhance programs and services in all provinces and territories (except Quebec, which receives funding through a separate immigration agreement). This additional investment will allow immigrants to adapt quickly and successfully and have every opportunity to contribute to the economy and society.
Foreign Credential Recognition
Many immigrants to Canada, though well-educated and highly skilled, still face barriers in obtaining recognition of their qualifications, training and experience. In this budget, the Government is moving forward on its commitment to create an agency to ensure foreign-trained immigrants meet Canadian standards, while getting those who are trained and ready to work in their fields of expertise into the workforce more quickly.
Under the leadership of the Minister of Human Resources and Social Development, consultations with the provinces and territories and other stakeholders are underway on the mandate, structure and governance of the agency, and the Government will proceed on the basis of the advice received. To facilitate the consultation process and to take the first steps toward the establishment of a Canadian agency for assessment and recognition of credentials, this budget sets aside $18 million over two years.
In order to help provinces and territories address short-term pressures with regard to the supply of affordable housing, the Government is providing a one-time payment of $800 million, to be paid into a third-party trust, contingent on sufficient funds from the 2005–06 surplus in excess of $2 billion. The Affordable Housing Trust will support investments to increase the supply of affordable housing, including transitional and supportive housing.
Pending confirmation in fall 2006 of the Government of Canada's financial results for 2005–06, funding will be distributed on an equal per capita basis among provinces and territories, and notionally allocated over three years. More details can be found in the section entitled "Restoring Fiscal Balance in Canada".
A New Approach
Government of Canada spending on programs directed towards Aboriginal people, including claims, has increased to $9.1 billion in 2005–06 from $7.4 billion in 2000–01, an average annual increase of 4.3 per cent. While federal programs targeted to Aboriginal Canadians have reduced disparities between Aboriginal people and other Canadians, unacceptable gaps remain.
Federal Spending on Aboriginal People
The Government spends approximately $9.1 billion1 each year to fund programs directed towards Aboriginal people.
1 Sources: 2005–2006 Estimates: Report on Plans and Priorities; Indian and Northern Affairs Canada.
The Government is committed to meeting the targets agreed upon at the fall 2005 First Ministers meeting with national Aboriginal leaders. The way forward will require a joint commitment by all parties to deal with the root causes and structural issues causing these socio-economic gaps.
The Government will work with Aboriginal leaders and provinces and territories to develop a new approach with workable solutions to meet the established targets. Strong accountability and governance structures will be essential to ensure concrete improvements in outcomes and to ensure programs are effective. This budget provides $150 million in 2006–07 and $300 million in 2007–08 for the following priority areas:
Education: Although Aboriginal students have made significant gains in educational attainment over the past two decades, the Government is committed to improving Aboriginal education outcomes as this is key to eliminating the socio-economic gap.
Women, Children and Families: The Government recognizes the pivotal roles that Aboriginal women play within their families and their communities and in improving socio-economic outcomes.
Water and Housing: Aboriginal Canadians living on reserve suffer from a severe housing shortage and a backlog in the renovation of current units. Many do not have access to clean and safe drinking water. To properly address these fundamental needs, it is essential to consider innovative solutions that could help address this chronic situation over the longer term.
Details concerning initiatives will be provided by the Minister of Indian Affairs and Northern Development in the coming months.
The Government is committed to honouring the Agreement-in-Principle reached on November 20, 2005, with the legal counsel for former Indian residential school students, the churches, the Assembly of First Nations and other Aboriginal organizations.
In anticipation of a final agreement, $2.2 billion has been set aside for the common experience payments and for other programmatic elements such as healing and commemoration. In addition, provision has been made in anticipation of an improved Independent Assessment Process to address claims of serious abuse in the Indian residential school system, which would replace the current Dispute Resolution Framework. Compensation through the Independent Assessment Process would in all cases be paid by the Government following validation by an independent adjudicator.
The Government believes that this financial recognition of the often negative impact of the residential school experience, buttressed by support programs and compensation for those who suffered harm, will help former students to build a better future for themselves and their families in communities across Canada. Programs and activities devoted to truth and reconciliation and commemoration of the residential school experience should lead to a broader understanding among all Canadians of the impacts of the Indian residential school system.
In order to help provinces address short-term pressures with regard to the housing needs of Aboriginal Canadians living off reserve, the Government is providing a one-time payment of $300 million, to be paid into a third-party trust, contingent on sufficient funds from the 2005–06 surplus in excess of $2 billion. The Off-Reserve Aboriginal Housing Trust will support investments to increase the supply of rental housing and enhance home ownership opportunities for Aboriginal Canadians living off reserve.
Pending confirmation in fall 2006 of the Government of Canada's financial results for 2005–06, funding will be distributed to provinces based on their share of the Aboriginal population living off reserve and notionally allocated over three years.
The pressures on housing in the territories, where many Aboriginal Canadians live, are particularly acute. In order to help the territories address short-term affordable housing pressures, the Government is providing a one-time payment of $300 million, to be paid into a third-party trust, contingent on sufficient funds from the 2005–06 surplus in excess of $2 billion. The Northern Housing Trust will support investments to increase the supply of affordable housing, including rental, transitional and supportive housing in the territories.
Pending confirmation in fall 2006 of the Government of Canada's financial results for 2005–06, funding will be notionally allocated over three years and distributed among the three territories as follows: $50 million each for the Yukon, the Northwest Territories and Nunavut, plus an additional $150 million for urgent needs in Nunavut.
More details on the two trusts can be found in the section entitled "Restoring Fiscal Balance in Canada."
In total, Budget 2006 confirms funding of over $3 billion in support of Aboriginal Canadians.
The Government is committed to taking actions that will lead to a cleaner, healthier environment. Beginning this year, by making major investments in public transit infrastructure and by providing incentives to encourage its use, concrete actions will be taken that improve the environment and improve the lives of Canadians.
Public transit plays an important role in easing traffic congestion in urban areas, reducing carbon dioxide and other emissions, and making communities more livable.
The Government will provide $1.3 billion in support of public transit capital investments.
The Government will accelerate investments in public transit infrastructure, by making $400 million available to provinces and territories. To date, nine agreements have been finalized with provinces and territories regarding this funding, with the balance to be concluded in coming months.
The Government will also provide a one-time payment of $900 million to provinces and territories to be paid into a third-party trust, contingent on sufficient funds being available from the 2005–06 surplus in excess of $2 billion. The Public Transit Capital Trust will support capital investments in public transit infrastructure including rapid transit, transit buses, intelligent transportation systems and other investments including high occupancy vehicle and bicycle lanes.
Pending confirmation in fall 2006 of the Government of Canada's financial results for 2005–06, funding will be notionally allocated over three years and distributed to provinces and territories on an equal per capita basis. More details on the trust can be found in the section entitled "Restoring Fiscal Balance in Canada".
The Government expects that provinces and territories will take transit ridership in the municipalities into account when the funds are disbursed.
Federal Funding for Public Transit
|Transit payment (Bill C-66)||Public Transit Capital Trust||Total|
(millions of dollars)
|Newfoundland and Labrador||6.5||14.1||20.6|
|Prince Edward Island||1.7||3.8||5.5|
|Note: Totals may not add due to rounding.|
Budget 2006 proposes a tax credit on the purchase cost of monthly public transit passes, or passes of a longer duration, effective July 1, 2006. This measure will encourage public transit use by providing $150 million in 2006–07 and $220 million in 2007–08 in benefits to approximately 2 million Canadians who make a sustained commitment to use this environmentally friendly mode of transportation. An individual who purchases passes costing $80 per month throughout the year will receive up to about $150 in federal tax relief for the year. All transit users, including commuters, students and seniors, will qualify. The effectiveness of this measure will depend on transit authorities continuing to work to boost ridership through quality service and low fares.
The tax system currently provides accelerated capital cost allowance for investments in energy generation equipment that uses renewable energy or uses fossil fuel efficiently. The budget proposes to implement the previously announced incentive for cogeneration systems in the pulp and paper industry that produce both thermal energy and electricity using a biomass residue from the pulping process referred to as "black liquor." This measure will encourage additional investment in technology that reduces emissions of greenhouse gases and air pollutants, while helping to improve the international competitiveness of Canadian mills.
It is estimated that this measure will reduce federal revenues by $10 million in 2006–07 and $20 million in 2007–08.
Canada needs to remain competitive and productive while sustaining the quality of life of Canadians. The Government recognizes that world-class infrastructure, such as an efficient transportation network and safe and reliable water systems, is key to meeting these objectives. As illustrated by the measures in this budget, the federal government is committed to providing stable and reliable funding to provinces, territories and municipalities to help them meet their infrastructure needs. In doing so, the Government will maximize value for taxpayers' money by supporting infrastructure projects that adhere to best practices, by not funding cost overruns and by requiring fund recipients to be accountable to Canadian taxpayers.
Canada's core national highway system is a very important national asset. For example, in terms of value, about 63 per cent of Canada-United States trade in goods was moved by truck in 2003. Also, individual Canadians, whether they live in urban or rural areas, depend on major highways for many of their travel needs. Additional investments in highways will result in a more efficient and safer system.
The provinces and territories are responsible for the bulk of Canada's core national highway system. To help the provinces and territories meet system needs, this budget provides a total of $2.4 billion over the next five years for a new Highways and Border Infrastructure Fund. A key objective of the new Fund will be to cost-share with provinces and territories improvements to the core national highway system, including the Trans-Canada Highway.
Canada's trade with the rest of the world flows through "gateways" (e.g. major land border crossings and ports) where transportation networks converge to connect centres of economic activity. To capitalize on this advantage, this budget announces the Government's intention to invest a total of $591 million over the next eight years in Canada's Pacific gateway. While some of the funding will also be directed towards related measures such as maintaining secure and efficient border services, most of it will go towards infrastructure improvements such as bridge and road upgrades and railway grade crossing projects.
In recent years, the $600-million Border Infrastructure Fund has committed funding towards infrastructure improvements at Canada's border crossings with the United States, including Windsor, Sarnia, Fort Erie and St. Stephen. The new Highways and Border Infrastructure Fund will provide funding for future federal investments in infrastructure improvements that support Canada's major gateways, including border crossings with the United States.
The Canada Strategic Infrastructure Fund has been making key strategic investments in all regions of Canada in projects such as highways, urban transit, sewage treatment and flood mitigation. These much-needed investments have been made in cooperation with the provinces and territories, municipalities and the private sector. In recognition of its importance, this budget provides an additional $2 billion for the Canada Strategic Infrastructure Fund. This will allow the Government to fund new projects.
Through tripartite initiatives such as the Infrastructure Canada Program and, more recently, the Municipal Rural Infrastructure Fund, the Government has helped municipalities in all parts of Canada undertake thousands of infrastructure improvement projects. Many of these projects have consisted of improvements to water and wastewater distribution and treatment infrastructure. To ensure that such assistance is maintained at current levels, this budget provides an additional $2.2 billion over five years to the Municipal Rural Infrastructure Fund. This will allow this fund to support further improvements to municipal infrastructure, such as the Evergreen Commons at the Don Valley Brick Works in Toronto.
Unprecedented Federal Support for Infrastructure
Canada's New Government Infrastructure Initiatives
(millions of dollars)
|New funding for infrastructure
|Highways and Border
|Public Transit Capital Trust1||300||300||300||–||900|
|Existing infrastructure agreements2||1,467||1,197||741||470||3,875|
|Other funding for cities
|Increase to 100% of the
|Gas tax revenue funding||600||800||1,000||2,000||4,400|
1 The precise total amount will be determined and deposited in a third-party trust upon confirmation in the fall of the Government of Canada's final financial outcome for 2005–06. Funding is allocated notionally over three years.
2 Agreements include the Canada Strategic Infrastructure Fund, the Border Infrastructure Fund, the Municipal Rural Infrastructure Fund and the Infrastructure Canada Program.
Budget 2006 confirms the Government's commitment to maintain and significantly expand its level of infrastructure investment. These investments will see federal support for provincial, territorial and municipal infrastructure increasing to new levels, totalling $16.5 billion over the next four years. By 2009–10 the level of federal support for provincial, territorial and municipal infrastructure will reach almost $5 billion. This is nearly eight times the average annual support during the past 10 years, and more than the estimated annual revenue generated by the federal excise tax on gasoline.
In summary, Budget 2006:
- Provides more than $5.5 billion in new federal funding over the next four years for the Highways and Border Infrastructure Fund, Canada's Pacific Gateway Initiative, the Canada Strategic Infrastructure Fund, the Municipal Rural Infrastructure Fund and the Public Transit Capital Trust.
- Maintains the estimated $3.9 billion in current funding over the next four years under existing infrastructure agreements.
- Maintains the gas tax funding commitment under the New Deal for Cities and Communities. Including the increase to 100 per cent of the rebate of the goods and services tax and the federal portion of the harmonized sales tax that municipalities pay, the federal government will deliver $7.1 billion over the next four years in support under the New Deal for Cities and Communities.
Charities play an invaluable role in assisting Canadians, and in contributing to our sense of community and to important projects in the cultural, education and social sectors. To encourage charitable giving, Budget 2006 proposes to eliminate capital gains tax on certain donations to charities. It also increases support for the Canada Council for the Arts.
Donations of Listed Securities to Public Charities
Donations of listed publicly traded securities to charities receive the charitable donations tax credit. In addition, since 1997, capital gains on such donations to public charities have been subject to an inclusion rate that is one-half the normal inclusion rate. The reduced rate is currently 25 per cent.
This budget proposes to exempt donations of publicly listed securities to public charities from capital gains tax, effective immediately. These charities now have a powerful set of tools for raising the funds they need to meet the needs of Canadians. Table 3.10 shows the tax support provided for charitable donations.
Tax Support for Charitable Donations
|Listed publicly traded securities to public charities|
(25% inclusion rate on capital gains)
(0% inclusion rate on capital gains)
|Amount of donation||$100||$100||$100|
|Reduction in capital gains tax2||–||$7||$14|
|Total tax assistance||46%||53%||60%|
|Donor's share of the cost of the donation||54%||47%||40%|
|1 Assumes that donor has made other donations totalling $200 or more in the year, so that the top tax credit rate applies.
2 Reduction from the standard 50% inclusion rate that would apply if the individual sold the security. Assumes that the adjusted cost base of the security is $40.
Canada Provides More Tax Assistance for Charitable Donations Than the United States
With the changes proposed in Budget 2006, Canada provides more tax assistance than the United States for both cash donations and donations of listed securities to public charities. In addition, Canada's limits on tax assistance relative to net income are higher than in the United States.
Tax assistance and net income limits for an individual donating $100 to a public charity are illustrated below:
Since the capital gains inclusion rate was initially reduced in 1997, donations of listed securities grew from $69 million to about $200 million in 2004. While many factors influence the donation of listed securities, it is estimated that the elimination of the capital gains tax on these donations may support about $300 million in annual donations.
This measure is expected to reduce revenues by $50 million in 2006–07 and 2007–08.
Under the Ecogift program, Canadian landowners may donate ecologically sensitive land, or easements and covenants on such land, to conservation charities to ensure its preservation in perpetuity. At present, an individual making an ecogift receives both a charitable donations credit and a reduced inclusion rate on capital gains associated with the donation. To encourage more Canadians to make ecogifts, this budget proposes to exempt donations of ecologically sensitive land under the Ecogift program from capital gains tax, effective immediately.
This measure is expected to reduce revenues by $5 million in 2006–07 and 2007–08.
Donations of Listed Securities to Private Foundations
To date, donations of listed securities to private foundations have not been eligible for the half-inclusion rate measure. The primary reason for this exclusion has been concerns regarding the adequacy of current legislative provisions to safeguard against potential conflicts of interest, which could arise when individuals with significant holdings in a corporation also have influence over the management of a foundation's holdings of the same corporation.
The Government will consult with private foundations and other interested parties in the coming months with a view to developing appropriate self-dealing rules. If appropriate rules can be devised, the Government would be prepared to bring them before Parliament within the next year, and extend the capital gains exemption for listed securities to donations to private foundations at the same time.
It is anticipated that the elimination of capital gains tax on donations of publicly listed securities to public charities will provide significant benefits to the arts and culture community. In addition, Budget 2006 provides $50 million over two years to enhance and expand the Canada Council for the Arts' support of the arts in Canada. The Council has played an important role in supporting professional artists and non-profit arts organizations for almost 50 years.
Families and Communities
(millions of dollars)
|Canada's Universal Child Care Plan|
|Universal Child Care Benefit||1,610||2,085||3,695|
|New child care spaces||250||250|
|Other family measures|
|Children's physical fitness tax credit||40||160||200|
|Child Disability Benefit||35||45||80|
|Refundable medical expense supplement||15||10||25|
|Canadian Strategy for Cancer Control||52||52||104|
|Providing greater tax relief to pensioners||490||405||895|
|Right of Permanent Residence Fee||134||90||224|
|Foreign credential recognition agency||6||12||18|
|Tax credit for the cost of public transit||150||220||370|
|Accelerate capital cost allowance for forestry bioenergy||10||20||30|
|Highways and Border Infrastructure Fund||245||340||585|
|Canada's Pacific Gateway Initiative||19||72||91|
|Canada Strategic Infrastructure Fund||–||181||181|
|Municipal Rural Infrastructure Fund||200||332||532|
|Charitable giving and support for the arts|
|Eliminating capital gains tax on donations to charities||55||55||110|
|Canada Council for the Arts||20||30||50|
|Total—families and communities||3,342||4,855||8,197|
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