Finance Minister Jim Flaherty is taking steps to go after large-scale tax cheats as part of the 2013 federal budget, announcing the creation of a program that will reward informers with a 15-per-cent cut of the money the Canada Revenue Agency (CRA) collects.
But the snitch line is only going after major tax cheats; the government will only offer a reward if the total amount recovered is more than $100,000. And the CRA will not pay out to people who snitch on themselves.
The Harper government has been repeatedly criticized for what the opposition says is efforts to stall or block the recovery of money in tax shelters.
The Tories counter that they have been able to recover more revenue from tax cheats than the previous Liberal government.
In all, the government hopes to raise about $4 billion in revenue by closing tax loopholes and tracking down a greater number of tax cheats.
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2013 BUDGET HIGHLIGHTS
Revenues for 2013-14 forecast at $263.9 billion, spending at $282.6 billion, deficit at $18.7 billion. Deficit projected to drop to $6.6 billion in 2014-15 and become an $800-million surplus in 2015-16. With files from Althia Raj and The Canadian Press.
Tackling The Skills Gap
The Tories plan to create a Canada Job Grant that will provide $15,000 or more per person -- up to $5,000 provided by the federal government, the rest matched by the province/territory and the employer. Nearly 130,000 Canadians are expected to benefit when the new grant is fully implemented in 2017-2018. Essentially, this is the government saying it is taking training out of the hands of provincial governments because it hasn’t worked and placing it in the hands of individuals. The Canada Job Grant will replace the Labour Market Agreements the feds signed with the provinces, which expire in 2014.
Manufacturing and small business get tax-credits introduced in past budgets extended to help spur investment and growth. There will be $1.4 billion in tax relief for manufacturers by extending the temporary accelerated capital cost allowance for new investment in machinery and equipment. And hundreds of millions for small business owners.
The government has pledged more than $53 billion in infrastructure spending, including $47 billion in new funding over 10 years. This includes $32.2 billion over 10 years for a “Community Improvement Fund” to build roads and public transit as well as recreational facilities and other community infrastructure projects. The Fund will consist of an index Gas Tax Fund and the incremental GST Rebate for Municipalities.
Military spending will be re-jigged that it is modeled on the ship building strategy and aimed at creating more jobs in Canada and key domestic capabilities with an eye towards exports.
Foreign Affairs - Aid Agency Cancelled
The budget has cancelled the Canadian International Development Agency, the primary agency responsible for foreign aid. Its duties will be merged into the Department of Foreign Affairs.
Tax Evasion Snitch Line
The government says it is aggressively going after tax avoiders/and closing tax loopholes. They are launching a “Stop International Tax Evasion Program” where the Canada Revenue Agency will pay individuals with knowledge of “major international tax non-compliance” a percentage of the tax collected as a result of information provided. The CRA will only pay a reward if the information results in total additional assessments exceeding $100,000 in federal tax.
Public Service Cuts
Two departments -- Canada Revenue Agency and the Department of Fisheries and Oceans -- will see big cuts. Departments will see a 5 per cent cut in their travel budgets. The government also says in the budget it intends to work with the public sector unions to “further align overall compensation with other public and private sector employers.”
The federal budget says new projects related to Canada's perimeter security deal with the United States will go ahead as planned, despite budget woes south of the border. The federal budget has given the green light to almost a dozen information-sharing and infrastructure projects related to the Beyond the Border initiative between the two countries. The vaunted deal was announced with fanfare by Prime Minister Stephen Harper and U.S. President Barack Obama in December 2011 at the White House. The plan aims to speed the flow of goods and people across the 49th parallel while protecting the continent from a terrorist attack.
Tobacco Prices Going Up
The government wants to reduce import tariffs on a number of goods including baby clothing, skis, snowboards and gold clubs. But it plans to offset the $76-million revenue loss from that by hiking excise taxes on chewing tobacco and other manufactured tobaccos, to bring them in line with cigarette taxes.
Finance Minister Jim Flaherty's spring budget commits Ottawa to five more years of funding through the Investment in Affordable Housing program. The level of commitment is the same as in the past: $253 million a year over five years, which needs to be matched by the provinces and territories and can be spent on new construction, renovation, home ownership assistance, rent supplements, shelters and homes for battered spouses. But there's a new twist to the funding. Home construction in the program will support the use of apprentices so that newcomers to the construction trades can build up crucial experience. The budget also commits $100 million over two years to build 250 more units of affordable housing in Nunavut, where homes are so crowded that illness spreads easily and poverty abounds.
The Canadian Press reports:
OTTAWA - The new federal budget keeps the Harper government's Holy Grail of eliminating the deficit in time for the next election within reach, but getting there will now depend as much on good fortune as on a good road map.
Given the softening economy in the latter half of last year and first months of 2013, Finance Minister Jim Flaherty's target of getting back to balance by 2015 — after piling up $172 billion in debt in eight years — will depend on three assumptions all coming to good.
A strong rebound in the economy, no slackening the leash on spending and succeeding in ferreting out tax cheats will all be required to turn Flaherty's financial blueprint into reality.
The thin margin for error is made clear by looking at deficit projections from now until 2015-16, the year the finance minister experts to table a spring budget showing black at the end of the year instead of red.
This year's deficit is now projected to total $25.9 billion, virtually unchanged from last year.
Then things get interesting.
According to government calculations, the fiscal shortfall improves by $7.2 billion next year, $12.1 billion the next and $7.4 billion in the year after that, landing on the narrowest of surplus ledges with a $800 million in 2015-16.
That's a bumpier track than Flaherty had laid out at this time last year, when the annual improvement was more gradual and the target year was more firmly in the black at a surplus of $3.4 billion.
Flaherty insisted this is a winnable race that doesn't require much of a sweat.
"I'm actually very confident. We could have done more," he said. "We could have had a figure that showed a bigger surplus than $800 million in 2015-16."
"We do not need to slash and burn, we can be sensible over time."
Economists agree the final goal is still achievable, but they say the odds have gotten longer.
"It doesn't mean it won't happen, but we have to see the proof of it happening," said Mary Webb, who specializes in government fiscal matters for Scotiabank.
Bank of Montreal chief economist Doug Porter concurs, noting that last year analysts were debating whether Ottawa was in position to post a surplus a year earlier — 2014 — something the prime minister bragged about during the 2011 campaign. No such conjecture this time around.
"I feel less confident in saying they can balance the budget in 2015 than a year ago," said Porter.
The big reason Ottawa finds itself in a tighter fiscal corner in terms of its own imposed deadline is that slower growth than expected has cost the economy about $17 billion, and the treasury about $2.5 billion in tax revenues. As well, the government says the deep discount on Canadian oil exports as compared with world prices has added up to about $8.4 billion in 2011-2012.
For the target to be hit, the government is counting on the economy to rebound soon. It projects that nominal growth — output gains plus inflation — will bounce back to 4.7 per cent in 2014 and stay there in 2015. That's not normally an outlandish amount in a solid recovery, but the previous two years are estimated at 3.1 and 3.3 per cent rates respectively, so 2014 had better be a good year for the economy.
If it happens, Ottawa will see tax revenues perk up by 5.4 and 6.4 per cent in the critical 2014-15, 2015-16 years.
As well, Flaherty is committing to keep spending of his discretionary budget at basically zero — in real terms even below zero — for the next three years.
The budget shows the government's spending on operations dropping from $80.5 billion in the just-completed year, to $76.5 billion the period covered by this budget, to $74 billion in 2014-15 and only edging back to $75.2 billion in the target year of 2015-16.
Finance officials say much of the savings stem from the three-year, $5.2-billion cost-cutting measures introduced last year gathering steam with time, but as analysts point out, those figures don't make any allowance for public service pay increases, inflation or population growth.
The last piece of the puzzle that must fall in place is the government's hope to realize about $4 billion in savings over the next three years from closing tax loopholes, tracking down tax cheats, and minor efficiencies in the public service, such as reducing travel costs.
Flaherty says for the plan to work, he has to maintain discipline.
TD Bank senior economist Derek Burleton agrees. But to the government's credit, it has hit most of its spending targets in the first few years of the austerity program Flaherty. And he points out that Flaherty has continued to build in a $3-billion risk margin, so he can afford a few minor slips.
"I don't think they are being overly optimistic," he said. "The growth rates are what economists are forecasting, and they have built in a prudence factor."