Archived - Chapter 2
Progress Achieved to Date
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Just 72 days into the fiscal year, Canada's Economic Action Plan is on track and delivering results for Canadians.
Measures under federal control are largely in effect: taxes are reduced, enhanced Employment Insurance benefits are flowing, and projects are selected or funds are flowing for federally owned infrastructure.
For partnership measures, the Government has finalized agreements, enabling provinces, territories, municipalities and private sector partners to take action on specific projects and initiatives. The Government will back up this commitment with a strong "use it or lose it" approach, ensuring the money is spent in two years.
The following timeline shows the milestones reached on Canada's Economic Action Plan:
- January 27—The Government tables the earliest federal budget in history.
- February 6—The Budget Implementation Act, 2009 is introduced, including $7.6 billion for budget measures and $2.4 billion in tax reductions.
- March 10—The Government reports on action taken to secure the necessary authorities to proceed with about $20 billion of stimulus, or about 90 per cent of the 2009–10 funding in the Action Plan.
- March 12—The Budget Implementation Act, 2009 receives Royal Assent.
- June 11—Funds are flowing, or have been committed, for 80 per cent of the Action Plan.
The Government will provide a further update on progress in implementing the Action Plan in the fall. Canadians can follow progress on the Government's website for the Economic Action Plan at www.actionplan.gc.ca.
This chapter reports in detail on progress achieved since the March report in implementing individual measures contained in the Action Plan. It is divided into six sections that reflect the actions taken in the Plan:
- Reducing the Tax Burden for Canadians: Providing Canadians with significant, permanent personal income tax relief and Canadian businesses with the lowest overall tax rate on new business investment among the major industrialized economies.
- Helping the Unemployed: Providing more investments for Employment Insurance benefits to support those who have lost their jobs and provide the training required to help Canadians get the additional skills they need.
- Building Infrastructure to Create Jobs: Providing new infrastructure and housing funding to create jobs across Canada and ensure Canada emerges from the economic downturn with a more modern and greener infrastructure, as well as an expanded capacity to provide affordable housing to lower-income Canadians.
- Creating the Economy of Tomorrow: Improving infrastructure at colleges, universities, federal laboratories and research facilities, creating additional support for graduate students and internships, and supporting research and technology in areas such as clean energy.
- Supporting Industries and Communities: Supporting adjustment and protecting jobs in regions, communities and sectors of the Canadian economy that have been most affected by the severe downturn.
- Improving Access to Financing and Strengthening Canada's Financial System: Providing up to $200 billion through the Extraordinary Financing Framework to ensure the continued stability of the Canadian financial system and to improve access to financing for Canadian households and businesses.
|(millions of dollars—cash basis)|
|Reducing the Tax Burden for Canadians||3,020||3,180||6,200|
|Helping the Unemployed||2,708||3,546||6,254|
|Building Infrastructure to Create Jobs||9,803||6,649||16,452|
|Creating the Economy of Tomorrow||2,371||1,664||4,035|
Including International Partnerships
to Support the Automotive Industry
|Total federal stimulus measures||29,395||17,217||46,612|
|Assumed provincial and territorial actions1||9,835||5,115||14,950|
|Total Economic Action Plan stimulus||39,230||22,332||61,562|
|1 Assumes Ontario component of support to automotive industry is proportional to federal component.|
- Tax reductions are an essential part of Canada's Economic Action Plan. They support Canadians and Canadian businesses in the short term by providing stimulus, putting money in the hands of Canadians to spend as they see fit, thus encouraging job creation and helping create a long-term advantage for sustained economic growth.
- Canada's Economic Action Plan includes measures that will reduce the tax burden for Canadian families and businesses by more than $20 billion over 2008–09 and the following five fiscal years. This builds on early action to offset the economic downturn taken by the Government in the 2007 Economic Statement, which announced substantial permanent tax reductions.
- In total, actions taken by this Government since 2006 will reduce taxes by $220 billion over 2008–09 and the following five fiscal years, allowing Canadian individuals, families and businesses to keep more of their money.
- Canadians have been seeing the benefits of income tax reductions announced in the Action Plan on their pay stubs since April 2009.
- Increased child benefits will start to flow in July, providing up to $436 per year for a family with two children, making raising children more affordable.
- Tax relief for low- and middle-income seniors has been put in place, providing up to an additional $150 in annual tax savings, to help our seniors thrive in retirement.
- The Government is collaborating with the provinces and territories to enhance the Working Income Tax Benefit, effective for 2009. This will further reduce the welfare wall by helping ensure that more low-income Canadians are financially better off as a result of getting a job.
- Tax assistance of up to $1,350 in support of home renovations and improvements is helping stimulate the economy and encouraging investment in Canadian homes. The Canada Revenue Agency has received more than 700,000 enquiries about the Home Renovation Tax Credit through its website and by telephone.
- The Economic Action Plan also helps small businesses, a vital part of the economy, to retain more of their earnings for reinvestment, expansion and job creation by increasing the amount of small business income eligible for the reduced federal income tax rate of 11 per cent to $500,000 in 2009 from $400,000 (saving small businesses up to $8,000 each for 2009 alone).
- A two-year 100-per-cent capital cost allowance (CCA) rate for investments in computers will help businesses adopt newer technology at a faster pace.
- The extension of the temporary 50-per-cent straight-line accelerated CCA rate to manufacturing or processing machinery and equipment acquired in 2010 and 2011 will help businesses in manufacturing and processing industries make necessary equipment purchases and position themselves for long-term success.
- The one-year extension of the temporary 15-per-cent Mineral Exploration Tax Credit will support mineral exploration activity across Canada, helping to keep our mining industry growing.
"These tax changes will put money back in the pockets of Canadians, boosting confidence and encouraging spending, which is critical to the retail sector and Canada's overall economic recovery."
Retail Council of Canada, January 28, 2009
Canada's Economic Action Plan includes $6.2 billion over two years to stimulate the economy and support job creation by providing personal tax relief to Canadians, allowing Canadians to decide how best to spend their money.
|(millions of dollars)|
|Personal income tax relief for all taxpayers||470||1,885||1,950||4,305|
|Increases to the
National Child Benefit
Supplement and the Canada Child
|Enhancing the Working
|Targeted relief for seniors||80||325||340||745|
|Total—Reducing the Tax Burden
|Notes: Totals may not add due to rounding. The Canada Child Tax Benefit and the National Child Benefit Supplement are considered expenditures for budgetary purposes and thus should not be included in calculations of total tax relief.|
In addition to these personal income tax measures, the Action Plan also includes the following tax measures to help both individuals and businesses in this time of economic uncertainty (Table 2.3).
|(millions of dollars)|
|Home Renovation Tax Credit||500||2,500||3,000|
|Increase in Home Buyers' Plan withdrawal limit||15||15||30|
|First-Time Home Buyers' Tax Credit||30||175||180||385|
|Tariff relief on machinery and equipment||12||76||81||169|
|Mineral Exploration Tax
Credit for flow-through
|Increase the income
limit for the
small business tax rate
allowance rate for computers
capital cost allowance
rate for manufacturing or processing
machinery and equipment1
|Total—Tax Measures to
|Timing of Home Renovation Tax Credit||-500||500|
|Total stimulus value||42||3,721||696||4,459|
|Note: Totals may not
add due to rounding.
1 Businesses will benefit from the extension of this measure, first introduced in the 2007 budget and extended in the 2008 budget, starting in 2011–12.
Reducing the Tax Burden for Canadians and Canadian Businesses
Tax reductions are an essential element of Canada's Economic Action Plan. They support Canadian businesses and jobs in the short term by providing up-front stimulus, which helps individuals and businesses to weather the global recession, and also create a long-term advantage for sustained economic and employment growth. The Plan includes measures that will reduce the tax burden for Canadian families and businesses by more than $20 billion over 2008–09 and the following five fiscal years. It builds on early action to offset the economic downturn taken by this Government in the 2007 Economic Statement, which announced substantial permanent tax reductions. In total, actions taken by this Government since 2006 will reduce taxes by $220 billion over 2008–09 and the following five fiscal years.
Tax relief is providing immediate economic stimulus. The stimulus incentives of the temporary Home Renovation Tax Credit, for example, began to take effect the day after its announcement in January 2009, helping to sustain employment in the housing industry during the current economic slowdown. There has been considerable interest in the credit. The Canada Revenue Agency has received more than 700,000 enquiries about the Home Renovation Tax Credit through its website and by telephone, and many Canadian retailers have introduced complementary promotions and are actively promoting the credit.
Tax relief provides Canadians with more money to help ease the financial pressure during these challenging economic times. Canadians can now earn more before paying federal personal income tax, and earn more at higher levels before paying federal personal income tax at higher rates, as a result of the Economic Action Plan, resulting in significant savings. Since April 2009, many Canadians can already see the tax relief on their paycheques due to lower payroll deductions. The Plan also increases the amount families can earn before their child-related benefits are reduced, which will result in new child benefits for many Canadian families starting in July 2009. Important tax relief for low- and middle-income seniors has also been put in place.
Enhancements to the Working Income Tax Benefit (WITB) will further reduce the welfare wall by helping ensure that more low-income Canadians are financially better off as a result of getting a job. The WITB, in combination with other tax relief provided through the Economic Action Plan and previously by this Government, has substantially improved work incentives and the financial circumstances of many low- and modest-income Canadians.
Because many of the personal income tax measures are permanent, they will provide ongoing benefits and help set the stage for long-term economic and employment growth and higher living standards for Canadians.
Temporary tax relief for businesses is also providing immediate stimulus, encouraging new investment, growth and job creation in all regions of Canada.
- The introduction of a temporary two-year 100-per-cent capital cost allowance (CCA) rate for computers acquired after January 27, 2009 and before February 1, 2011 will help businesses adopt newer technology at a faster pace.
- The extension of the temporary 50-per-cent straight-line accelerated CCA rate to manufacturing or processing machinery and equipment acquired in 2010 and 2011 will assist manufacturing and processing industries restructuring and retooling to position themselves for long-term success.
- The one-year extension of the temporary 15-per-cent Mineral Exploration Tax Credit from April 1, 2009 to March 31, 2010 will support mineral exploration activity across Canada.
In addition, the increase in the amount of small business income eligible for the reduced federal income tax rate of 11 per cent to $500,000 as of January 1, 2009 from $400,000 will further support the growth of small businesses and encourage reinvestment and job creation.
The permanent elimination of tariffs on a range of machinery and equipment will lower the costs of Canadian businesses that must import specialized equipment from overseas to modernize their operations.
A competitive business tax system that is responsive to changes in the economic environment is important to encourage new investment, growth and job creation in all regions of Canada. The tax relief introduced in Canada's Economic Action Plan builds on broad-based corporate income tax reductions that will reduce the general corporate income tax rate from 22.12 per cent (including the corporate surtax) in 2007 to 15 per cent by 2012. The schedule of rate reductions will allow Canada to have the lowest statutory corporate income tax rate in the Group of Seven (G7) by 2012, and the lowest overall tax rate on new business investment (marginal effective tax rate or METR) in the G7 by 2010. In 2012, Canada will have a METR that is lower than the average METR for Organisation for Economic Co-operation and Development (OECD) countries (Chart 2.1).
These broad-based corporate income tax reductions and other tax relief measures are building a solid foundation for future economic growth. At the same time, they are helping Canadian businesses to resist the effects of today's global economic challenges and protecting jobs.
Improving the competitiveness of the Canadian tax system requires collaboration among all governments to help Canadian businesses compete globally as the economy recovers.
Provinces and territories have taken action to enhance Canada's business tax advantage, building on actions taken at the federal level.
- Several provinces are reducing their corporate income tax rates. Over the next few years, Ontario, British Columbia and New Brunswick will be reducing their corporate income tax rates to 10 per cent or below. Alberta is currently at 10 per cent. Together with the scheduled reductions in the federal general corporate income tax rate to 15 per cent by 2012, these provincial actions will help Canada move closer to the Government's goal of a 25-per-cent combined federal-provincial statutory corporate income tax rate.
- Harmonization of Ontario's sales tax with the Goods and Services Tax (GST) under the Harmonized Sales Tax Framework will also reduce taxes on businesses, ensuring that they can thrive and generate jobs for Canadians.
- All general provincial capital taxes will be eliminated by 2012. The Government of Canada has encouraged this action by introducing in Budget 2007 a temporary financial incentive to encourage provinces to eliminate their capital taxes. This action builds on the elimination of the federal capital tax in 2006.
Further reductions in provincial corporate income tax rates would do even more to improve the competitiveness of Canadian businesses across the country and further encourage investment and job creation.
Personal Tax Relief for Canadians
Canadians already have more money in their pockets as a result of many of the measures announced in the Economic Action Plan. Effective January 1, 2009, significant tax relief and economic stimulus were provided through an:
- Increase in the basic personal amount and the top of the two lowest personal income tax brackets by 7.5 per cent above their 2008 levels. This allows Canadians to earn more income before paying federal income taxes or before being subject to higher tax rates.
- Effective doubling of the tax relief provided by the Working Income Tax Benefit to encourage low-income Canadians to find and keep a job.
- Increase in the Age Credit amount by $1,000. For low- and middle-income seniors, this means additional annual tax savings of up to $150.
In addition, the Economic Action Plan includes, effective July 1, 2009, an increase of the level at which the National Child Benefit Supplement for low-income families and the base benefit of the Canada Child Tax Benefit are phased out, providing a benefit of up to $436 for a family with two children.
Tax Relief for Canadians
Personal Tax Relief for Canadians
Beverly earns $35,000 and is a single parent of two children. In total, her personal income taxes have been cut by three-quarters, or $1,216, and she receives an additional $436 in child benefits, making her $1,652 better off.
Tax Relief for Canadians
Personal Tax Relief for Canadians
Bob and Emily have two children. Bob earns $45,000 and Emily earns $85,000. In total, their personal income taxes have been cut by 10 per cent, providing $1,938 in additional tax relief.
Tax relief for individuals and families is now largely committed, and Canadians are realizing its benefits through higher take-home pay.
To help Canadians now and provide stimulus right away, the Canada Revenue Agency has adjusted the 2009 Payroll Deductions Tables to reduce the amount of tax withheld on individuals' paycheques. People paying by instalment, including many seniors, can adjust their payments to reflect the changes for the 2009 taxation year so that they can benefit from lower taxes now, rather than when they file their returns next year. Legislation implementing the reductions announced in the Action Plan received Royal Assent on March 12, 2009.
Tax Relief for Canadians
Personal Tax Relief for Canadians
Matthew 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.
Enhancing the Working Income Tax Benefit (WITB) offers an important means to strengthen work incentives for low-income Canadians. The Government expects that low-income working Canadians will receive benefits from the enhanced WITB when they file their 2009 tax returns. In recognition of the role played by provinces and territories in providing income support, the Government is using the interim period to consult on whether jurisdiction-specific changes could be made to improve its alignment with provincial and territorial income-tested benefit programs. The final design of the enhanced WITB will be tabled in Parliament following the consultations.
A Strong Record of Tax Relief for Individuals and Families
Since coming to office in 2006, the Government has taken actions that will reduce taxes on individuals and families by an estimated $160 billion over 2008–09 and the following five fiscal years. This includes $20 billion of tax relief announced under the Economic Action Plan, and earlier actions to offset the economic downturn announced in the 2007 Economic Statement, which provided substantial permanent tax reductions.
Canadians at all income levels are benefiting from this tax relief with proportionately greater savings for those with lower incomes. The Government's commitment to tax relief is also paying off in the form of greater opportunity and choice for people. For example:
- All Canadians—even those who do not earn enough to pay personal income tax—are benefiting from the 2-percentage-point reduction in the GST rate. Maintaining the GST credit level while reducing the GST rate by 2 percentage points translates into more than $1.1 billion in benefits annually for low- and modest-income Canadians.
- All taxpayers are benefiting from personal income tax relief, which includes reducing the lowest personal income tax rate to 15 per cent from 16 per cent and increasing the basic amount that all Canadians can earn without paying federal income tax.
- The Working Income Tax Benefit is strengthening work incentives for low-income Canadians already in the workforce and encouraging low-income Canadians to enter the workforce.
- The new Tax-Free Savings Account is improving incentives to save through a flexible, registered general-purpose account that allows Canadians to earn tax-free investment income while saving for their individual needs such as for a car, a home or retirement.
The Government has also introduced measures targeted to help families, students, seniors and pensioners, workers, persons with disabilities, and communities. Examples of such measures include:
- A Child Tax Credit in recognition of the expenses associated with raising children.
- Exempting scholarship and bursary income from tax.
- The introduction of pension income splitting, the doubling of the pension income credit and two $1,000 increases to the Age Credit amount to provide substantial tax savings to seniors and pensioners.
- The Canada Employment Credit, which recognizes work-related expenditures such as home computers, uniforms and supplies.
- The Registered Disability Savings Plan, which will contribute to the financial security and well-being of children with severe disabilities.
- A tax credit for public transit passes.
|Personal income tax
for all taxpayers
|Increases to the
Benefit Supplement and Canada
Child Tax Benefit
|Enhancing the Working
|Targeted relief for seniors||325||Yes||325||April|