The much anticipated federal budget was announced on Wednesday, and it addressed crucial topics in the Canadian economy. According to Global News, the budget includes a number of proposals to support Canadians during the pandemic and what will come after. The announcement on Wednesday promised COVID-19 benefits extensions, a bump in Old Age Security (OAS) payments, and new standard pay for minimum wage workers. Additionally, a number of reforms will be implemented in different Canadian sectors including the overheating housing sector.
Click here to read the detailed measures of the federal budget.
Within the realm of the federal budget, the Bank of Canada is very optimistic about the economy’s outlook. The bank expects the Canadian economy to grow by 6.5% this year, according to The Globe and Mail. The growth projections for the economy will drive rates to increase in the second half of 2022, but for now, the overnight policy rate is kept at 0.25 percent.
According to the government, the federal budget promises a CRB and CRCB eligibility periods extension. The Canada Recovery Benefit (CRB) will be extended by 12 weeks, until Sep 25, allowing claimants to receive $1000 (pre-tax) every two weeks. The Canadian Recovery Caregiving Benefit (CRCB) on the other hand, will be extended by four weeks allowing those who qualify to receive $500 a week.
Ottawa is also eyeing the implementation of luxury tax, excise duties, and taxes on foreign-owned residential properties. First, a new luxury tax on new cars and private aircrafts at more than $100,000 and boats worth over $250,000. Second, excise duties on vaping products and a $4 increase on the tobacco excise tax on a carton of 200 cigarettes. Third, homeowners who are not Canadian citizens or permanent residents would have to pay an annual tax of 1% on vacant or underused residential real estate.
The federal budget ends with good news for minimum wage workers. Ottawa will set a $15 per hour minimum wage in federally regulated industries. However, this policy does not affect workers in industries that are provincially regulated.
All these measures will have to be approved by the Canadian parliament or the House of Commons.
Detailed federal budget measures:
COVID-19 benefits:
Canadian Recovery Benefit (CRB) eligibility period will be extended by 12 weeks, until Sept. 25. Claimants will receive $1000 (pre-tax) every two weeks.
The CRB is an alternative to those who don’t qualify for Employment Insurance (EI) or those who were receiving Canadian Emergency Response Benefit (CERB).
For the first four of the 12 additional weeks, those who qualify will receive $500 a week, and $300 a week for the last eight weeks.
The Canada Recovery Caregiving Benefit (CRCB) will be extended by four additional weeks, allowing claimants to receive $500 a week.
{Values are before tax deductions}
Employment Insurance and Old Age Security:
Long-term reforms to EI include a 420-hour qualifying standard for regular and special benefits, and a 14-week minimum entitlement for regular benefits.
Extension EI sickness benefits from 15 to 26 weeks, taking effect Summer, 2022.
Canadians on Old Age Security (OAS) who will be 75 or older in June 2022 will receive a one-time payment of $500 in August 2021, if the budget is approved.
A 10% increase to OAS payments for pensioners aged 75 or older in July 2022.
Luxury tax:
A new luxury tax on new cars and private aircrafts at more than $100,000 and boats worth more than $250,000.
This tax would come into effect at the beginning of 2022.
Empty home taxes:
Homeowners who are not Canadian citizens or permanent residents will have to pay a tax of 1% of the value of residential real-estate that is considered vacant or underused.
Expected to yield $700 million in additional revenue over four years and will be used to improve housing affordability for Canadians.
Vaping tobacco products taxes:
Ottawa will implement an excise duty on vaping products and a $4 increase on the tobacco excise duty on a carton of 200 cigarettes, which came into effect this week.
Federal minimum wage:
The budget includes a $15 per hour minimum wage in federally regulated industries.
The policy would not affect minimum wage workers in industries that are provincially regulated.
Sources:
1) Alini, E. (2021, April 19). How Canada's federal budget Affects benefits, taxes, and the minimum wage. Retrieved April 22, 2021, from https://globalnews.ca/news/7764150/canada-budget-2021-benefits-taxes-minimum-wage/
2) Rendell, M. (2021, April 21). Bank of Canada Hikes growth Forecast, could raise rates in second half of next year. Retrieved April 22, 2021, from https://www.theglobeandmail.com/business/economy/article-bank-of-canada-hikes-growth-forecast-could-raise-rates-in-second-half/
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