OTTAWA — The federal government wants to slash prices on imported baby clothes, golf clubs and hockey equipment, but it plans to raise the cost of fine-cut tobacco and chewing tobacco to discourage consumption.
There were no individual or corporate income tax cuts in Thursday’s federal budget, but these boutique tax changes may draw a bit of spark in Finance Minister Jim Flaherty’s otherwise tame stay-the-course budget.
The prices on goods from China, Brazil and Korea, however, are likely to jump after the federal government said it plans to hike tariffs on countries formerly considered as "developing." Seventy-two higher-income and trade competitive countries will no longer benefit from Canada's General preferential Tariff (GPT) that offers lower-than-normal tariff rates on developing countries as a way to spur their economic growth.
Flaherty said the government has been preoccupied with the Canada-U.S. price gap, which has persisted despite the appreciation of the Canadian dollar against the U.S. dollar.
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Imported goods
Year: 2013
What: The federal government wants to <a href="http://www.huffingtonpost.ca/2013/03/21/canada-budget-2013-surpri_n_2919842.html?1363898276" target="_blank">slash prices on imported baby clothes, golf clubs and hockey equipment</a>, but it plans to raise the cost of fine-cut tobacco and chewing tobacco to discourage consumption
Volunteer firefighters
Year: 2011
What: Tax credits for volunteer firefighters
Travellers
Year: 2004
What: A reduction in the Air Travellers Security Charge
Adoptive parents
Year: 2005
What: Tax credit of up to $10,000 for adoptive parents for fees related to their adoption.
Parents of active kids
Year: 2006
What: Parents can get a tax credit of up to $500 if children under 16 enrol in fitness activities.
Students
Year: 2007
What: Canadian museums get $5 million to get summer interns
Traveller
Year: 2007
What: Forty-eight hour visits outside of the country gets at $400 limit duty and tax free.
Armed Forces members
Year: 2004
What: Canadian soldiers don't pay income tax while on "high risk operational missions" overseas. It was pegged to cost about $30 million a year.
We politicians feel your pain too
Year: 2010
What: PM, MPs, senators take a wage freeze.
Patriotism
Year: 2008
What: $25-million for 2010 Olympic torch relays.
Truck drivers
Year: 2007
What: Truck drivers can deduct meal expenses of up to 80 per cent from 50 per cent.
Pocket change
Year: 2012
What: Canadian penny eliminated at savings of $11 million.
Funny money
Year: 2010
What: Polymer bills that will last longer, saves $15 million.
Next: 2012 budget highlights
2012 BUDGET HIGHLIGHTS
The government is calling the budget a plan for Jobs, Growth and Long-term Prosperity.<br><br>
"In this budget, our Government is looking ahead not only over the next few years but also over the next generation," said Finance Minister Jim Flaherty. "The reforms we present today are substantial, responsible and necessary. They will ensure that all across government we are focused on enabling and sustaining Canada's long-term economic growth."<br><br>
However, while the budget does include many investments, it also make a number of cuts and changes that will save money. Here are some of the highlights.
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(File photo by THE CANADIAN PRESS/Sean Kilpatrick)
PUBLIC SERVICE CUTS
The government is cutting spending by $5.2 billion on an ongoing basis, but it says it will not reach that total until 2014-2015.
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Ottawa says 70 per cent of these savings will come from "operational efficiencies."
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The planned reduction in spending is expected to result in the elimination of 19,200 public service jobs over a three-year period, 4.8 per cent of total federal employment. The government expects 7,200 of those positions to be eliminated through attrition. Six hundred executives positions are expected to be slashed.
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Roughly $900 million will be spent making these job cuts, on things such as severance and benefits.
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After 2014-2015, the public service cuts will save the federal government $5.23 billion per year.
THE CBC
The government is cutting the budget of Canada's national broadcaster by $115 million per year by 2014-2015. Currently, the CBC's total budget stands at roughly $1.1 billion per year, making for a cut of roughly 10 per cent.
THE PENNY
The federal government is eliminating the penny.
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But prices won't necessarily be rounded. The cent will continue to be the smallest unit of sale and non-cash transactions, such as spending done with credit cards, will continue to be settled to the nearest cent.
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Existing pennies will continue to be legal tender for an indefinite period of time, but the Mint will stop producing new ones and distribution will cease in Fall 2012.
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If no pennies are available for a cash transaction, it will be rounded to the nearest five cent increment after GST/HST.
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The government says it currently costs 1.6 cent to manufacture a penny and that supplying them to the economy costs $11 million per year.
(CP photo)
CRIME & JUSTICE
The government says it has no intention of building any new prisons, despite the passage of the omnibus crime bill that some experts suggests will increase the number of people incarcerated. The Tories plan to slash $295 million from Corrections Canada by 2014-2015.<br><br>
The RCMP will also receive major cuts, $195.2 million by 2014-2015.<br><br>
But the government will spend $9.6 million over three years to combat counterfeiting.
ENVIRONMENT
The government is moving to alter the current process for the environmental assessment of resource-based projects.
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It plans to move to one review for one project and to give these reviews a definite deadline. The change will affect the Northern Gateway pipeline. Additionally, the government wants to focus resources on reviewing the largest plans with the greatest potential for environmental impact. The federal government says it will do this while continuing to protect the environment.
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The government says this change is aimed at simplifying a complex system of reviews that imposes costly delays and deters investment.<br><br>
Canada's first near-urban national park will also be declared in the Rouge Valley in suburban Toronto.
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Other highlights include:
- By 2014-2015, Environment Canada's budget will be reduced by $53.8 million per year.<br>
- $50 million will be spent over two years to protect species at risk.
OAS: FREEDOM 67
The government is increasing the eligibility age for receiving Old Age Security (OAS) and Guaranteed Income from 65 to 67.
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The change will be made starting on April 1, 2023 and will be fully implemented by January 2029.
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The government will also allow individuals to choose to defer payment for a maximum of five years starting in July 2013.
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If a person does defer, they will receive a larger adjusted pension than if they had begun collecting at 65.
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The government says it is making the changes primarily due to demographic shifts. The pending retirement of the Baby Boomers will increase the total cost of the program from $38 billion in 2011 to $108 billion in 2030.
HEALTH CARE
The feds are planning to reduce Health Canada's budget by nearly $310 million per year by 2014-2015.
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Health Canada and the Public Health Agency of Canada will consolidate many services, reducing what the government calls duplication, in order to achieve some of these savings.
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The government will also eliminate Assisted Human Reproduction, a group involved in the study of potential uses for stem cells.
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They also propose:<br>
- Expanding GST/HST and income tax breaks for health care services.<br>
- $51.2 million over two years to improve food safety.
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(Alamy photo)
RESEARCH AND DEVELOPMENT
The government is making an investment of more than $1 billion in science and technology.
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Canada currently lags behind other similar economies in terms of private sector investment in R&D and overall innovation, according to the government.
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Here are a few highlights of the spending:<br>
- $400 million to help increase venture capital investment by businesses.<br>
- $100 million for the Business Development Bank Of Canada for venture capital investment.<br>
- $110 million per year for the Industrial Research Assistance Program.<br>
- $105 million over two years help pay for innovation in the forestry sector.<br>
- $500 million over five years for the Canada Foundation for Innovations to pay for new competitions. Funding will start in 2014-15.<br>
IMMIGRATION
The government will revamp the immigration system by killing a backlog of 300,000 skilled foreign worker applicants by sending them their money and applications back. Up to $130 million will be spent refunding fees to skilled worker applicants who paid under outdated criteria.
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The feds are planning to improve the system for the recognition of foreign credentials
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The government will move to ensure businesses first look to domestic sources of labour before using the Temporary Foreign Worker Program.
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<blockquote><strong>CORRECTION:</strong> A previous version of this story stated that the budget will kill a backlog of 460,000 skilled foreign worker applicants by sending them their money back. The actual number is 300,000. </blockquote>
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(pwenzel on Flickr)
SECURITY
The budget will implement the Beyond the Border security pact with the United States (The Action Plan on Perimeter Security and Economic Competitiveness and the Action Plan On Regulatory Cooperation).
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But the coming changes don't mean the Canada Borders Service Agency will escape cuts. The department's budget will be reduced by $143.4 million by 2014-2015
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It will also seek to streamline for the process of bringing goods home from abroad by increasing the dollar amount exempted from tariffs for travellers.
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(Photo by Bill Pugliano/Getty Images)
FOREIGN AFFAIRS
The budget seeks to continue the government's work to expand Canada's international trading relationships.
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"Our government is undertaking the most ambitious trade expansion plan in Canadian history," said Flaherty.
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In his speech, Flaherty also signals that, while the U.S. will remain our largest trading partner, Canada needs to open its export economy to emerging economies. China, India and the Trans-Pacific Partnership are mentioned by name.
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However, there will be cuts.
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The International Assistance Envelope, which includes the Canadian International Development Agency, Foreign Affairs and International Trade Canada, the International Development Research Centre the Royal Canadian Mounted Police and Natural Resources Canada, will be cut by $377.6 million by 2014-2015.
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Most of that money will come from The Canadian International Development Agency -- $319.2 million.
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Foreign Affairs and International Trade Canada will be cut by $29.1 million.
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The federal government also plans to find $80 million in saving by selling official residences abroad.
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(Israeli Prime Minister Benjamin Netanyahu meets with Prime Minister Stephen Harper March 2, 2012 in Ottawa -- Amos Ben Gershom/GPO via Getty Images)
DEFENCE
The budget touts the government's progress in modernizing the Canadian Forces through major investment. However, the Defence budget is about to fall substantially.
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Some of this reduction will come from improvements in efficiency, but much will come from the end of the combat mission in Afghanistan.<br><br>
The cuts will amount to roughly $1.12 billion by 2014-2015. According to Armine Yalnizyan, of the Canadian Centre for Policy Alternatives, these cuts are over and above the roughly half a billion announced during a previous round of strategic review.
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The size of the military will not shrink but it won't grow either. The regular Canadian Forces will remain at 68,000 members and the reserve force at 27,000.
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Veterans Affairs will also be on the receiving end of cuts - $66.7 million by 2014-2015.
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The budget will also provide $5.2 billion for the Coast Guard over the next 11 years.
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(Canadian soldiers prepare to leave Kandahar military base in southern Afghanistan on July 17, 2011 -- ROMEO GACAD/AFP/Getty Images)
KATIMAVIK
The government is eliminating the Trudeau-era youth program Katimavik, as The Huffington Post Canada first reported.
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The federal government says the program benefits a very small number at an excessive cost per person.
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(CP photo)
FISHERIES AND OCEANS
The budget reduces spending on Fisheries and Oceans by $79.3 million by 2014-2015
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The department will undergo a substantial restructuring. Services will be consolidated and the size of its motor vehicle fleet will be cut. It will also focus less on research, relying more on academia.
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(AFP/Getty Images)
ABORIGINAL EDUCATION
The government will spend $275 million over three years on First Nations education.<br><br>
The money is budgeted for the building and renovation of schools on reserves.
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Ottawa is also set to spend $27 million over two years on the Urban Aboriginal Strategy.
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$330.8 million will also be provided over two years to build and expand water infrastructure on reserves.
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(CP)
MP PENSIONS
Coming changes to MP Pensions are not outlined in the budget. Finance Minister Jim Flaherty said the changes he wants to make, increasing pension contributions by the MPs themselves and raising the age of eligibility will have to be discussed.
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(Alamy photo)
Employment Insurance
The government is making a number of changes to Employment Insurance (EI) it says are aimed at creating a more efficient program.<br><br>
-$387 million over two years for matching benefit amounts to wages in different local labour markets. Depending on the unemployment rate in the region, claimants will need between 14 and 22 weeks to qualify for EI.
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-$74 million over two years to help make sure claimants benefit from getting a job. EI claimants will be able to keep 50 per cent of their earnings without getting their benefits clawed back.
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- Limiting premium increases to no more than 5 cents per year.
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- $21 million over two years to improve the content and timeliness of information provided to job seekers.
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(Alamy photo)
Ottawa now plans to take tariffs off selected items to see if it can put downward pressure on prices in Canada, he said.
“This is an important test. We are going to take a few items, baby clothes, hockey equipment, other sporting equipment, golf clubs, a few other things like that and we are going to take the tariffs off, and we are going to see what happens to prices in Canada, and we’ll see if we actually see a reduction in prices,” Flaherty told reporters Thursday. “This is a test case for us.”
Baby clothing and ice skates currently incur an 18 per cent tariff when they are imported to the country. Various pieces of hockey equipment have tariffs ranging between 2.5 per cent and 18 per cent, while skis and snowboards have tariffs of 6.5 per cent to 20 per cent and tariffs on golf clubs range from 2.5 per cent to 7 per cent.
Scrapping the tariffs completely comes with the understanding that wholesalers, distributors and retailers will pass the savings on to consumers, the government said. It plans to monitor the impact of the cuts on Canadian prices, and if prices drop into line with those in the United States, the tariffs on other goods might also drop.
The measure is expected to cost the federal treasury $76 million, but the government plans to recoup that cost by eliminating the preferential excise duty for manufactured tobacco, bringing it in line with cigarette prices.
The change, which will come into effect Friday, means taxes will jump to $5.31 from $2.89 for each 50 grams of chewing tobacco and fine-cut tobacco used for roll-your-own cigarettes. The measure is expected to increase federal revenue by $75 million in 2013-2014 and $65 million in 2014-2015.
“A key component of the Government’s health strategy is to tax tobacco products at a high and sustainable level to discourage their consumption,” the government wrote in Budget 2013.
Gregory Thomas, the federal director of the Canadian Taxpayers Federation, told HuffPost that scrapping the preferential excise duty is unlikely to have much of an effect because most people who use those products tend to buy them on the black-market or on First Nations reserves.
“The kind of people who roll their own smokes are the kind of people who go across the border, who buy them on First Nations reserves …so it will probably drive that much more activity underground,” Thomas said.
As far as baby clothes and golf clubs go, Thomas said, it is not a bad move.
“It’s like the (elimination of the) penny last year. There is no harm in it, but we would have liked to see them relax a whole range of tariff barriers, especially when there are no Canadian businesses who are truly going to be affected.”
MORE ON THE FEDERAL BUDGET
Earlier on HuffPost:
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Posted: 03/21/2013 4:27 pm EDT | Updated: 03/22/2013 9:48 am EDT