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The minimum wage in the province of Ontario will be increased to $7.15 an hour on February 1, 2004 from the current pay of $6.85 an hour, the level where it has been frozen for nearly nine years.
The rate will rise to $8 an hour over the next three years, with annual rates going up every February 1. Thus, the rate will increase to $7.45 in 2005, to $7.75 a year later and then to $8 in 2007.
In addition, the minimum wage for students under 18 working less than 28 hours a week who are currently paid $6.40 an hour will rise to $6.70 an hour on Feb. 1, increasing to $7.50 in 2007.
Alcohol servers, who now earn a minimum of $5.95 an hour, will see their pay rise to $6.20 on Feb. 1, increasing to $6.95 in 2007.
The Canada Customs and Revenue Agency (CCRA) operates an online request service that allows business clients to ask electronically for certain financial actions to be processed on their accounts. The requests must be processed manually, but each request is forwarded promptly to the appropriate office for action, says the CCRA. Requests can be made for corporate tax, excise tax, excise duty, excise tax on insurance premiums, and the air travellers security charge. For further information, see Online Requests for Business from the CCRA.
The Deputy Prime Minister and Minister of Finance, John Manley, presented the 2003 budget in the House of Commons yesterday afternoon at 4:00 p.m. EST. The following is a summary of the highlights contained in the budget.
· The government is continuing previously announced tax reductions and significantly increasing spending in health care, families, research and innovation and Canada’s military.
· The budgetary surplus for 2002-03, before current budget measures, was expected to be $6.4 billion and $4.8 billion in 2003-04.
· The government announced spending initiatives that result in a balanced budget this year and for the next 2 years, allowing for a $3 billion contingency and an allowance for economic prudence.
· Program spending is planned to increase by 11% in the current year, 3% next year and 4.5% in the following year.
· Canada’s economy is expected to grow by 3.2% in 2003 and 3.5% in 2004.
Measures concerning businesses
· The small business deduction limit will increase by $100,000 to $300,000 by 2006. The limit will increase from $200,000 in $25,000 annual increments commencing in 2003. Consequently, the phase out of the $2-million expenditure limit for investment tax credits will also be adjusted to reflect the increase in the small business deduction limit.
· The federal capital tax will be eliminated by 2008 by increasing the capital deduction from $10 million to $50 million effective 2004, and by reducing the rate of tax over the period 2004 to 2008.
· The budget proposes to improve the taxation of resource income by phasing in over 5 years: a reduction in the tax rate to 21%, allowing deductions for actual royalties and mining taxes paid, the elimination of the 25% resource allowance and a new tax credit for qualifying expenditures.
· The expiration date for the mineral exploration tax credit is extended to December 31, 2004.
· Eligibility for Class 43.1 - renewable energy and energy efficient equipment eligible for accelerated depreciation - has been further broadened.
· The definition of a “tax shelter” is expanded and clarified.
· The Film or Video Production Services Tax Credit increases from 11% to 16% of qualified expenditures.
· The provisions of the Income Tax Act and Excise Tax Act (ETA) relating to interest, penalties, administration and enforcement will be harmonized.
· Beginning 2003, technical changes will be made to the Qualified Limited Partnership (QLP) rules relaxing the restrictions that will allow most typical Canadian venture capital funds to structure as a QLP.
Measures concerning GST/HST and Excise Taxes
· The ETA will be amended to clarify that the supply of student transportation services by school authorities will be treated as an exempt service, effective the date of the introduction of GST.
· The ETA will be further amended to clarify that purchases by municipalities of contracted services continue to be taxable, effective from the date of the introduction of GST.
· The 4-cent-per-litre excise tax is removed on the portion of diesel fuel produced from certain environmentally friendly materials.
Measures concerning individuals
· The National Child Benefit Supplement will increase by $150 per child in July 2003, $185 in July 2005 and by $185 in July 2006.
· The budget proposes to introduce a $1,600 Child Disability Benefit (CDB), which will be a supplement of the National Child Tax Benefit. The CDB will be effective in July 2003 and will become payable starting in March 2004.
· For purposes of the disability tax credit, the activities of feeding oneself and dressing oneself have been further clarified.
· The list of eligible medical expenses for the medical expense tax credit has been expanded, notably to include the cost of gluten-free food products for individuals with celiac disease.
· The money purchase limit for registered pension plans (RPPs) will be increased to $15,500 for 2003, $16,500 for 2004 and $18,000 for 2005.
· Corresponding increases will be made to the maximum pension limit of $1,722 per year of service for defined benefit RPPs, raising the limit to $1,833 for 2004 and $2,000 for 2005.
· The deferred profit sharing plan (DPSP) limit will remain at one-half of the money purchase RPP limit.
· The registered retirement savings plan (RRSP) limit will be increased to $14,500 for 2003, $15,500 for 2004, $16,500 for 2005 and $18,000 for 2006.
· The RPP and DPSP limits will be indexed to average wage growth starting in 2006, and the RRSP limit will be indexed starting in 2007.
· The budget proposes to allow, after 2003, money purchase RPPs to pay pension benefits in the form of the same income stream currently permitted under a registered retirement income fund (RRIF).
· For dispositions that occur after February 18, 2003, the small business capital gains rollover measure will be expanded by eliminating the limits on the original investment and reinvestment allowed, and by extending the time in which to make an allowable reinvestment.
· The budget proposes to allow, beginning in 2003, a reduced automobile standby charge to apply to the extent annual personal driving does not exceed 20,000 kilometres per year (currently 12,000 kilometres) and the automobile is used more than 50% (currently 90%) for business purposes.
· The budget proposes to introduce a new exclusion from the “automobile” definition for extended cab pick-up trucks under certain conditions. This will allow a full deduction of related expenses and exclusion from the automobile benefit provisions. The amended definition will apply for taxation years beginning after 2002.
· The Air Travellers’ Security Charge will be reduced from $12 to $7 for one-way travel within Canada and from $24 to $14 for round-trip travel on tickets purchased on or after March 1, 2003.
· The government proposes to set the employee premium rate of employment insurance for 2004 at $1.98 by legislation.
The general corporate income tax rate is being reduced
to 23% from 25% as of January 1, 2003, and to 21% by 2004. The rate
reduction is part of the government’s five-year tax reduction plan that
was announced in the 2000 federal budget. With
this reduction, Canada’s average federal/provincial corporate tax,
including capital taxes will
now be below the average U.S. rate.
The Five-Year Tax Reduction Plan also includes cuts in personal taxes. On average, personal income taxes are being reduced by 21 per cent. For families with children, savings under the plan amount to 27 per cent.
All Canadians will receive a tax cut effective January 1, 2001. In 2001, a one-earner family of four with an income of $40,000 will save about $1,100 in federal personal income tax. A two-earner family of four earning $60,000 will save about $1,000.
Personal Income Tax
Education Tax Credit
Canada Child Tax Benefit
Disability Tax Credit
Effect on January 1, 2001, the amount that is used for calculating the disability tax credit will rise to $6,000 from $4,293. This credit helps people with severe and prolonged disabilities.
Caregiver Tax Credit and Infirm Dependant Tax Credit
Corporate Income Tax
The 28% general corporate tax rate on small business income between $200,000 and $300,000 will be reduced to 21% by 2004 – starting with a 1-point reduction on January 1, 2001. Further 2-point cuts will take effect in each of the following three years.
A tax-deferred rollover will be provided for shares received on certain foreign spin-offs.
The taxation of certain stock option benefits will be deferred, increasing the stock option deduction and allowing an additional deduction for certain stock option shares donated to charity.