Yesterday, the Government of Canada released Budget 2022 “A Plan to Grow Our Economy and Make Life More Affordable”. The Government has described this budget as back-to-basics addressing job growth and affordability.
In this budget, the Government has allocated over $10 billion for housing and home affordability, $8 billion for defence spending, and over $3.8 billion to support the development of critical minerals.
The government is winding down its COVID-19 support measures and expects COVID support programs like the Canada Emergency Wage Subsidy to be wrapped up by the end of the year.
- Canada experienced real GDP also grew 6.7 per cent at an annual rate in the last quarter of 2021—the second-strongest pace of growth in the G7
- Canada has seen the fastest jobs recovery in the G7—recouping 112 per cent of the jobs lost at the outset of the pandemic, compared with 90 per cent in the U.S.
- Canada’s deficit is set to be lower than projected in the 2021 Fall Economic Update, down from a projected $58.4 billion to $52.3 billion this year.
- Budget 2022 is also projecting a lower debt-to-GDP ratio, falling to 45.1% this year.
- The deficit is projected to fall to 0.9 per cent of GDP by 2024-25 before reaching 0.3 per cent of GDP by the 2026-2027 fiscal year.
- Additional taxes on banks and insurance companies, including a one-time 15% tax on income above $1 billion under the Canada Recovery Dividend, and permanently raising the corporate income tax on banks and insurance companies by 1.5% on income over $100 million.
- Introducing a gradual phase-out of access to small business tax rate, with access to be fully phased out once a business reaches $50 million of capital rather than the current $15 million. This will save small businesses an estimated $660 million over four years.
BUSINESS GROWTH STRATEGY:
- Creation of a Canadian Innovation and Investment Agency with $1 billion in funding over five years.
- Creation of the Canada Growth Fund, which will operate at arms-length from the Federal Government, to attract investment towards the policy goals of emissions reductions, supporting exports and supply chains. The fund will have an initial capital injection of $15 billion over five years and will aim to attract three times that in private capital.
- Investing $4 billion over five years for funding to the Canadian Mortgage Housing Corporation to launch a Housing Accelerator Fund to support municipalities to speed up housing development with the goal to create 100,000 new housing units over the course of five years.
- $725 million in support for creation of a tax-free savings account to provide first time home buyers with the ability to save up to $40,000 for a down payment. Contributions would be tax-deductible (like an RRSP), and withdrawals including investment income would be non-taxable (like a TFSA).
- $1.7 billion over 5 years to extend the incentives for the Zero-Emission Vehicles program until March 2025.
- $547 million over 4 years to launch a new purchase incentive program for medium and heavy-duty ZEVs to help businesses upgrade their fleets.
- $2.6 billion to finance a new investment tax credit encouraging businesses that spend on carbon capture, utilization and storage (CCSU).
- $500 million to support 1500 charging stations through the Canadian Infrastructure Bank.