Business Management Articles
Budget 2009 Goals:
More Jobs, More Spending, More Business for your Business
Stephen Meek, Partner
Markham Board of Trade
February 2009
Packed with more than $39 billion in stimulus measures over the next two years, the federal government is hoping that every person and organization in Canada will feel some positive impetus from the 2009 budget.
Finance Minister Jim Flaherty delivered an “economic action plan” on January 27 to help Canadian families and businesses deal with short-term challenges as well as to invest in long-term capacity so the country emerges stronger from the recession.
Along with more than $7 billion to support certain regions, communities and business sectors, including auto, forestry, manufacturing and clean energy, the budget focuses on three other key areas.
Consumer spending measures total nearly $13 billion. The budget increases the two lowest income tax brackets by an additional 5%, enhances the Canada Child Tax Benefit and the National Child Benefit Supplement, increases the Working Income Tax Benefit, and also increases by $1,000 the amount on which the Age Credit is based. By putting more money into consumers’ hands, the government expects they will buy more products and services from Canadian businesses.
Building infrastructure. From roads, bridges and railways, to broadband internet access, electronic health records, laboratories and border crossings, infrastructure incentives total almost $12 billion. These are intended to bolster Canada’s productive capacity – and the demand for related products and services.
Housing construction and renovation. Measures totaling $7.7 billion include a temporary home renovation tax credit, which allows Canadians to claim up to $1,350 when they renovate before February of next year. The budget also introduces a new non-refundable tax credit of $750 for first-time home buyers and increases the limit for withdrawals from the Home Buyers' Plan from $20,000 to $25,000. Several billion dollars are also allocated to eco-energy retrofits and renovations for social housing and housing for low-income seniors. All of these incentives are expected to build demand for renovation and construction products and services.
Factoring in the expected contributions by provinces, territories and municipalities, the total budget spending package tops $50 billion. The government also included a number of helpful measures specifically targeted to Canada’s small and mid-sized businesses.
- The budget increases access to credit in a number of ways. The maximum eligible loan amount for small businesses under the Canada Small Business Financing Program rises by $100,000 to $350,000 ($500,000 if financing is required to purchase real property). As well, there is a new Canadian Secured Credit Facility, which will provide up to $12 billion to support financing of vehicles and equipment. The lending capacity of the Business Development Bank of Canada, the Canada Mortgage and Housing Corporation and the Export Development Corporation has also been enhanced and the EDC will be permitted to temporarily support financing here in Canada including providing accounts receivable insurance.
- Small businesses also receive some tax relief. The amount of active business income eligible for the reduced corporate tax rate of 11% rose by $100,000 to $500,000.
- To encourage capital investment, the temporary 50% straight-line accelerated CCA rate has been extended two years to include qualifying manufacturing and processing equipment acquired in 2010 and 2011.
- As well, tariffs on a range of machinery and equipment have been eliminated, which will lower costs for manufacturers that must purchase specialized equipment from other countries.
- Until February 2011, the CCA rate temporarily increases from 55% to 100% and businesses can fully deduct the cost of a computer and systems software in the year in which they are purchased.
- Employment insurance premium rates are frozen at $1.73/$100 this year and next year.
With personal income taxes generating about 48 cents of every dollar of its revenue, the government needs to keep Canadians working. The hoped-for effect of budget 2009 is more jobs, more spending, and ultimately, more business for your business.
Stephen Meek is a partner of BDO Dunwoody LLP (www.bdo.ca). You can reach Stephen in the Markham office at (905) 946-1066 or smeek@bdo.ca.
