Budget 2008: The Facts

April 04, 2008

Tax-Free Savings Account:

• This is the first account of its kind in Canadian history. It will provide all Canadians with a powerful incentive to save.
• Canadians can save for whatever matters to them, be it a first car, a home renovation or a family vacation.
• The Tax-Free Savings Account is the most important savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).
• An RRSP is primarily intended for retirement. The Tax-Free Savings Account is like an RRSP for everything else in your life.
• This flexible, registered, general-purpose account will allow Canadians to watch their savings grow in eligible investment vehicles, tax free.
  

This Is How It Works:   

• First, Beginning in January 2009, Canadians aged 18 and older can contribute up to $5,000 every year to a registered Tax-Free Savings Account, plus carry forward any unused room to future years;
• Second, the investment income, including capital gains, earned in the plan will be exempt from any tax, even when withdrawn;
• Third, Canadians can withdraw from the account at any time without restriction. Better yet, there are no restrictions on what they can save for; and
• Finally, the full amount of withdrawals may be re-contributed to a Tax-Free Savings Account in the future, to ensure no loss in a person’s contribution room.
  

It Is a Powerful Incentive to Save:

• To help young people saving for their first car;
• To help couples saving for their first home;
• To help seniors stretch their retirement savings further; and
• To help every Canadian set aside a bit of cash each month for a special project, to help their kids, or to simply treat themselves.
  

To make it easier for lower- and modest-income Canadians to save, there will be no clawbacks. Neither the income or capital gains earned in a Tax-Free Savings Account nor the withdrawals from it will affect eligibility for federal income-tested benefits, such as the Guaranteed Income Supplement.

Support for Manufacturing and Forestry

• A further $1 billion in support for manufacturers and processors by extending accelerated capital cost allowance treatment by 3 years on a declining basis.
• $90 million to extend the Target Initiative for Older Workers to 2012
• $250 million over five years to the Automotive Innovation Fund to support research and development
• $72 million over two years for farm programs and to improve access to $3.3 billion in advance payments.
• Extending federal gas tax funding to municipalities permanently, providing an additional $2 billion in 2009-10 for essential infrastructure.
  

Pre-Budget 2008: Government’s Record of Support to Date

• Tax Cuts since 2006 are providing $21 billion in incremental tax relief to Canadians and Canadian businesses this year. This is equivalent to 1.4 per cent of Canada’s gross domestic product. Now that is a major stimulus.
• Reducing the federal corporate income tax rate from 22.1 per cent to 15 per cent by 2012.
• $1 billion Community Development Trust to provide vulnerable communities facing major downturns with much-needed financial assistance.
• Manufacturers and processors are now benefiting from our $1.3 billion accelerated capital cost allowance measure. This provides manufacturing and processing business with the ability to write off investments in machinery and equipment-100 percent over a two-year period.
• Increased capital cost allowance rates for manufacturing and other non-residential buildings and for computers, to better reflect the useful life of those assets.
• Making the largest single federal investment in public infrastructure since World War II through our Building Canada plan: a total of $33 billion over the next seven years for roads, bridges, water systems, public transit and international gateways.
• Negotiated an end to the long-standing and costly softwood lumber dispute with the U.S., securing the return of over $5 billion in duty deposits to Canadian producers.
• Investing $127.5 million in the Forest Industry Long-Term Competitiveness Initiative to support innovation and assist the industry to shift toward higher-value products and tap into new markets.
• Establishing a $25 million Forest Communities Program that will assist 11 forest-based communities, allowing them to participate in informed decision making on the forest land base.
• Providing new funding for skills trainings so that any Canadian who needs training can get training.
• Providing a tax credit for employers who hire apprentices, a grant for first- and second-year apprentices and a tax credit to help offset the cost of tools.
  

Economic Leadership: Tax Relief

• Tax-Free Savings Account with an annual contribution limit of $5,000 to help Canadians save.
• A further $1 billion in support for manufacturers and processors by extending accelerated capital cost allowance treatment by 3years on a declining basis.
• Delivering on the Tax Back Guarantee by dedicating $2 billion in annual interest savings by 2009-10 a year for essential infrastructure.
• Making the Scientific research and experimental development program more accessible for small and medium sized businesses.
• Reducing the tax compliance burden on small business
• One-year extension of the Mineral Exploration Tax CreditEconomic Leadership: Debt Reduction
  

 

For 2007-08, the Government plans to reduce the federal debt by an additional $10.2 billion
Total debt reduction since the Government assumed office is more than $37 billion

Economic Leadership: Boosting Confidence & Investment

• $250 million over five years to the Automotive Innovation Fund to support research and development.
• $80 million to meet the knowledge and innovation needs of Canada’s automotive, manufacturing, forestry and fishing industries.
• $90 million to extend the Targeted Initiative for Older Workers to 2012.
• $72 million over two years for farm programs and to improve access to $3.3 billion in advance payments.
• Economic Leadership: Investing in the Future
• $350 million annually for a new Canada Student Grant Program beginning in 2009, rising to $430 million by 2012-13.
• $25 million over two years to establish a new Canada Graduate Scholarship award.
• $123 million over four years to streamline and modernize the Canada Student Loans Program
• $22 million over two years to modernize and speed up the immigration system.
  

Economic Leadership: Leadership at Home and Abroad

Seniors:

• $60 million to fully exempt the first $3,500 of earned income from the Guaranteed Income Supplement calculation.
• Improving Safety:
• $400 million for provinces and territories to recruit 2,500 new police officers
• $30 million per year for the National Crime Prevention Strategy.
• $170 million over two years to improve the safety of food and natural health products.
• Supporting Vulnerable Canadians:
• $110 million to Mental Health Commission of Canada to increase our knowledge of those who are homeless and suffering from mental illness.
• $282 million over this and the next two years to expand the Veterans Independence Program to support the survivors of veterans.
  

Preserving the Environment:

• $250 million for carbon capture and storage research and demonstration projects.
• Expanded tax incentives for clean energy generation.
• $300 million to support nuclear energy and maintain nuclear safety.
• $21 million over two years to improve environmental law enforcement.
• $66 million over two years to set up the regulatory framework for industrial air emissions.
  

Infrastructure:

• $500 million in support capital investments in public transit.
• Creating a federal P3 office called PPP Canada Inc. to increase the use of public-private partnerships.
  

Defence:

• Annual increases in defence spending of 2 per cent starting in 2011-12, providing an additional $12 billion over 20 years.
  

Improving Our Borders:

• $75 million over two years to fund Canada Border Services Agency operations.
• New electronic passports, valid for 10 years, for Canadians to be introduced in 2011.
• $26 million over two years to process visas and enhance border security with biometric data.
• $29 million over two years for initiatives under the Security and Prosperity Partnership of North America.
  

Supporting Aboriginal Canadians:

• $70 million over two years for measures to foster Aboriginal economic development.
• $70 million over two years to improve First Nations education outcomes.
• $147 million over two years to improve First Nations and Inuit health outcomes.
• $331 million over two years to improve access to safe drinking water in First Nations.
  

Supporting the North:

• Increasing the Northern Residents Deduction by 10 per cent.
• $34 million over two years for geo-mapping of natural resources.
  

Sports and Culture:

• $9 million over two years for infrastructure investments in Canada’s National Museums
• $24 million over two years to support summer athletes.
• $25 million to make the 2010 Olympic and Paralympic Torch Relays a symbol of national pride.