On October 24, 2017, the Department of Finance released its Fall Economic Update. Finance Minister Bill Morneau stated that the Government was "doubling down on a plan with proven results and reinvesting in the middle class". Much of optimism surrounding the Fall Economic Update can be ascribed to the roaring economy as it has helped the Federal government surpass its own deficit projections by billions of dollars.

Finance Minister Bill Morneau had projected a deficit of $28.5 billion for the current fiscal year, but revised its projected deficit to $19.9 billion.

So, what do you expect the savings to be spent on? The Fall Economic Statement provides some insight into the government's plans:

  • Strengthening of the Canada Child Benefit by indexing such payments to inflation with such increases beginning in July 2018 ($200 increase (2018) and up to $500 (2019))
    • Single Parents with two children and $35,000 income will get $560 in 2019-20 benefit year
  • Enhancement of $500 million per year to the Working Income Tax Benefit, a refundable tax credit for the lowest income earners, starting in 2019
  • Enhancement to the Canada Pension Plan by $250 million
  • Lowering the small business tax rate to 10% on January 1, 2018 and down to 9% in 2019
  • $1.4 billion over 6 years to the Department of Fisheries and Oceans and the Coast Guard to maintain their fleet
  • $526 million over 5 years for Health Canada, RCMP, CBSA, Public Safety Canada for handling the legalization of marijuana
  • $150 million over 6 years for devising and implementing laws against drug-impaired driving

As mentioned in our earlier series of articles, Finance had released a number of proposals to amend the Income Tax Act which targeted privately held corporations. Although some measures in the initial proposals were clawed back due to criticism from the public, the tax and the business communities, certain measures, such as a restriction on "income sprinkling" and additional taxation on passive income earned within a corporation, have been retained. Increased tax revenues from these measures are included in the Government's economic projections, with an anticipated $1.2 billion in revenue over 6 years to come from the changes to the "income sprinkling" measures alone. The CBC reported Pierre Polievre, the Conservative finance critic, as stating "Nothing in today's proposal would see the family fortunes of this finance minister or this prime minister touched by any taxes at all. Once again, they have sheltered themselves".

Not surprisingly, the opposition parties were critical of the Government's Economic Update, noting in particular the significant increases to the projected deficit. In addition, it was noted that the Economic Update was intended to take attention away from the controversy surrounding Minister Morneau's personal finances, in particular, the fact that Morneau had failed to divest himself of his business holdings by placing them in a blind trust.

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