Finance Canada
Budget 2000 - Budget Plan, Annex 7- 1
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The budget provides a Five-Year Tax Reduction Plan. The Plan improves four areas of the tax system. It eliminates automatic increases in the tax burden due to bracket creep and eroding real benefits; it reduces the high tax burden at the middle-income level; it increases support for families with children; and it makes the Canadian economy more internationally competitive.
Table A7.1 summarizes those measures of the Plan that will be legislated pursuant to the 2000 budget and provides estimates of the amount of tax relief they will provide.
Table A7.2 provides a complete listing of additional specific measures and provides estimates of their impacts on federal tax revenues. A more comprehensive list of these measures and those announced in the six previous budgets is provided in the appendix to this annex.
Tables A7.3 to A7.6 provide estimates of personal income tax relief resulting from both the Plan and the 1997, 1998 and 1999 budgets. They include information on tax cuts for all taxpayers, families with children and low- and middle-income Canadians. The Plan will reduce total personal income tax by 15 per cent on an annual basis by 2004-05. When combined with tax measures in the 1997, 1998 and 1999 budgets, tax reductions average 22 per cent.
Tables A7.7 to A7.9 provide information on the extent of tax relief for typical Canadians as a result of measures in the Plan legislated pursuant to the 2000 budget. Tables A7.10 to A7.15 are more comprehensive as they show the impact of the entire Plan in combination with the tax relief actions taken in the 1997, 1998 and 1999 budgets.
The Plan will reduce taxes by a cumulative amount of at least $58 billion over the next five years. The estimate of tax relief is based on actions to be legislated pursuant to the budget and presumes all other personal and corporate tax actions are taken only in the final year of the Plan. To the degree these remaining actions are taken sooner – or the tax reductions exceed those set out in the Plan – the cumulative tax relief would exceed $58 billion.
Table A7.1
Federal Revenue Impact of Legislated Measures: General Tax Relief
| 2000-01 | 2001-02 | 2002-03 | |
|---|---|---|---|
| (millions of dollars) | |||
| Eliminate Automatic Increases in the Tax Burden Due to Inflation | |||
| Restore full indexation to the tax system effective January 1, 2000 | See below | ||
| Indexation of income amounts Canadians can earn tax-free1 | -420 | -730 | -1,145 |
| Reduce the High Tax Burden at the Middle-Income Level | |||
| Reduce the 26-per-cent tax rate to 24 per cent effective July 1, 2000 | -1,520 | -2,145 | -2,265 |
| Increase the income level at which the middle tax rate begins to apply1 | -380 | -675 | -1,060 |
| Increase the income level at which the top tax rate begins to apply1 | -55 | -105 | -165 |
| Eliminate the 5-per-cent surtax for basic federal tax up to $18,500 (about $85,000 in income) effective July 1, 2000, and reduce the surtax rate from 5 per cent to 4 per cent effective January 1, 2001 | -185 | -305 | -330 |
| Increase Support for Children | |||
| Canada Child Tax Benefit (CCTB) improvements1 | -475 | -1,020 | -1,350 |
| Make the Canadian Economy More Internationally Competitive | |||
| Reduce the federal corporate income tax rate to 27 per cent from 28 per cent on business income not currently eligible for special tax treatment effective January 1, 2001 | -60 | -375 | -425 |
| Reduce the federal corporate income tax rate to 21 per cent, effective January 1, 2001, on active business income between $200,000 and $300,000 earned by a small business | -20 | -90 | -95 |
| Reduce the capital gains inclusion rate from three quarters to two thirds | -15 | -135 | -230 |
| Postpone taxation of gains on qualifying stock options to when shares are sold rather than when options are exercised | -10 | -75 | -75 |
| Allow tax-free rollover of capital gains on qualified investments from one small business to another | -20 | -75 | -75 |
| Other indexation1 | -195 | -300 | -470 |
| Total | -3,355 | -6,030 | -7,685 |
| Of which indexation contributes | -1,270 | -2,185 | -3,450 |
| 1 Amounts include indexation, based on an assumed average annual inflation rate of 1.8 per cent | |||
Table A7.2
Federal Revenue Impact of Measures: Other
| 2000-01 | 2001-02 | 2002-03 | |
|---|---|---|---|
| (millions of dollars) | |||
| Personal Income Tax | |||
| Federal surtax for deemed residents | -5 | -5 | -5 |
| Foreign property rules | – | – | – |
| Persons with disabilities | -15 | -45 | -45 |
| Personal-use property | – | – | – |
| Charitable donations: designations in favour of charity | – | – | – |
| Ecologically sensitive land | -5 | -5 | -5 |
| Interest offset | – | – | – |
| Charitable donations of shares acquired with employee stock options | -10 | -10 | – |
| Partial exemption for scholarships, fellowships and bursaries | -5 | -30 | -30 |
| Corporate Tax Measures | |||
| Strengthening thin capitalization rules | – | 50 | 60 |
| Non-resident-owned investment corporations | – | – | 5 |
| Weak-currency borrowings | – | – | – |
| Government assistance for scientific research and experimental development (SR&ED) | 60 | 60 | 60 |
| Foreign tax credit and oil and gas production sharing agreements | – | – | – |
| Manufacturing and processing tax rate reduction extended to income from sale of steam | – | – | – |
| Adjustments to capital cost allowance regime | -10 | -45 | -80 |
| Capital tax surcharge on large deposit-taking institutions | 30 | 50 | – |
| Tobacco surtax1 | 70 | 70 | 70 |
| Goods and Services Tax/Harmonized Sales Tax | |||
| Distribution Centres | – | – | – |
| New Residential Rental Property Rebate | -15 | -40 | -45 |
| Jeopardy assessment and collection | – | – | – |
| Other Measures | |||
| SR&ED tax credit for internal use software development | – | – | – |
| Simplified film tax incentive | – | – | – |
| Heritage buildings | – | – | – |
| First Nations taxation | – | – | – |
| Release of information | – | – | – |
| Administration and enforcement of the tax law | – | – | – |
| Sharing of tax information with provincial statistical agencies | – | – | – |
| Changes to Countervailing Duty Law | – | – | – |
| Tobacco export tax exemption | – | – | – |
| Tobacco tax increase1 | 70 | 70 | 70 |
| Total | 165 | 120 | 55 |
| Small, non-existent or
prevents revenue loss. 1 Measures announced prior to the budget. |
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Table A7.3
Amount of Personal Income Tax Relief in 2004-05:
1997-1999 Budgets and the Five-Year Tax Reduction Plan
| Total | Families with children1 |
Low-/middle income2 |
|
|---|---|---|---|
| (millions of dollars) | |||
| Total 1997-1999 Budget Measures | 8,380 | 4,325 | 7,095 |
| The Five-Year Tax Reduction Plan | |||
| Increase the amount Canadianscan earn tax-free to $8,000 and $6,800 (spousal) | 2,760 | 960 | 2,630 |
| Reduce the middle rate to 23 per cent | 3,600 | 1,380 | 2,935 |
| Increase middle and upper tax brackets to $35,000 and $70,000 respectively | 3,670 | 1,420 | 3,050 |
| Eliminate 5-per-cent surtax | 865 | 370 | 80 |
| Enhance Canada Child Tax Benefit | 2,525 | 2,525 | 2,445 |
| Reduce capital gain inclusion rate to two thirds3 | 210 | 55 | 70 |
| Stock options | 75 | 25 | 5 |
| Rollover of capital gains | 75 | 25 | 5 |
| Other, including indexation of remaining parameters | 920 | 210 | 895 |
| Total | 14,700 | 6,970 | 12,115 |
| Total (1997-99 and the Plan) | 23,080 | 11,295 | 19,210 |
| 1 Calculated based
on the proportion of federal personal income tax relief that would accrue to families
with children. 2 Calculated based on the proportion of federal personal income tax relief that would accrue to low- and middle-income individuals and families with income of $85,000 or less. 3 Amount of personal income tax relief only – does not include portion that would accrue to corporations. |
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Table A7.4
Amount of Annual Personal Income Tax Relief:
All Taxpayers, 2004-05
| Five-Year Tax Reduction Plan |
All budgets 1997 – 2004 |
|
|---|---|---|
| Total net personal income tax reduction (billions of dollars)1 | 14.7 | 23.1 |
| Net personal income tax revenues before tax reduction (billions of dollars)2 | 97.5 | 105.8 |
| Per cent reduction in personal income tax | 15.1 | 21.8 |
| 1 Total tax
reduction as calculated in Table A7.3. 2 Personal income tax revenues in 2001-02 as presented in Chapter 3 of The Budget Plan 2000, grown to 2004-05 based on the growth rate of revenues in the 1999 Economic and Fiscal Update. Relative to aggregate federal personal income taxes estimated to be paid to the Government in fiscal year 2004-05, net of refundable credits (CCTB and the goods and services tax credit). These credits are estimated at $9.4 billion by 2004-05. |
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Table A7.5
Amount of Annual Personal Income Tax Relief:
Families With Children, 2004-05
| Five-Year Tax Reduction Plan |
All budgets: 1997 – 2004 |
|
|---|---|---|
| Total net personal income tax reduction (billions of dollars)1 | 7.0 | 11.3 |
| Net personal income tax revenues before tax reduction (billions of dollars)2 | 32.9 | 37.3 |
| Per cent reduction in personal income tax | 21.3 | 30.3 |
| 1 Based on average
share of all personal income tax reduction measures attributable to families with
children. Full calculation in Table A7.3. 2 Relative to aggregate federal personal income taxes estimated to be paid by families with children to the Government in fiscal year 2004-05, net of refundable credits (CCTB and the goods and services tax credit). These credits are estimated at $7.5 billion by 2004-05 for families with children. |
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Table A7.6
Amount of Annual Personal Income Tax Relief:
Low- and Middle-Income Canadians, 2004-05
| Five-Year Tax Reduction Plan |
All budgets: 1997 – 2004 |
|
|---|---|---|
| Total net personal income tax reduction (billions of dollars)1 | 12.1 | 19.2 |
| Net personal income tax revenues before tax reduction (billions of dollars)2 | 65.8 | 73.1 |
| Per cent reduction in personal income tax | 18.4 | 26.3 |
| 1 Based on average
share of all personal income tax reduction measures attributable to low- and
middle-income Canadians with income of $85,000 or less. Full calculation in
Table A7.3. 2 Relative to aggregate federal personal income taxes estimated to be paid by low- and middle-income Canadians to the Government in fiscal year 2004-05, net of refundable credits (CCTB and the goods and services tax credit). These credits are estimated at $9.4 billion by 2004-05 for low- and middle-income Canadians. |
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Table A7.7
Typical One-Earner Family of Four – 2000 Budget Annual Impacts
| Proposed 2000 budget | |||||
|---|---|---|---|---|---|
| Total income | Federal tax pre-2000 budget |
Total relief (2001)1 | Total relief as a % of federal tax)2 |
Total relief (2004) | Total relief as a % of federal tax |
| $ | $ | $ | $/% | $ | $/% |
| 15,000 | -4,398 | -679 | -679 | -1,069 | -1,069 |
| 20,000 | -3,601 | -679 | -679 | -1,098 | -1,098 |
| 25,000 | -2,000 | -681 | -681 | -1,385 | -1,385 |
| 30,000 | -37 | -506 | -506 | -1,285 | -1,285 |
| 35,000 | 1,710 | -543 | -31.8 | -1,124 | -65.8 |
| 40,000 | 3,367 | -582 | -17.3 | -1,128 | -33.5 |
| 50,000 | 6,467 | -782 | -12.1 | -1,253 | -19.4 |
| 60,000 | 9,592 | -1,007 | -10.5 | -1,477 | -15.4 |
| 75,000 | 14,783 | -1,152 | -7.8 | -1,794 | -12.1 |
| 100,000 | 22,396 | -1,194 | -5.3 | -1,631 | -7.3 |
| 125,000 | 30,008 | -1,266 | -4.2 | -1,703 | -5.7 |
| 1 Negative values
indicate a reduction in net tax paid to the federal government or an increase
in federal refundable credits (Canada Child Tax Benefit, goods and services tax
credit). 2 Where individuals and families receive more in federal refundable credits than they pay in federal income tax, the federal income tax reductions are indicated in bold and represent an increase in net federal benefits they receive. Percentages are not meaningful so the dollar amounts are repeated. |
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Table A7.8
Typical Two-Earner Family of Four – 2000 Budget Annual Impacts
| Proposed 2000 budget | |||||
|---|---|---|---|---|---|
| Total income | Federal tax pre-2000 budget |
Total relief (2001)1 | Total relief as a % of federal tax2 |
Total relief (2004) | Total relief as a % of federal tax |
| $ | $ | $ | $/% | $ | $/% |
| 15,000 | -4,571 | -607 | -607 | -896 | -896 |
| 20,000 | -4,503 | -675 | -675 | -964 | -964 |
| 25,000 | -3,650 | -675 | -675 | -1,088 | -1,088 |
| 30,000 | -2,366 | -735 | -735 | -1,433 | -1,433 |
| 35,000 | -576 | -547 | -547 | -1,255 | -1,255 |
| 40,000 | 820 | -367 | -44.8 | -827 | -100.9 |
| 50,000 | 3,179 | -343 | -10.8 | -692 | -21.8 |
| 60,000 | 5,811 | -501 | -8.6 | -970 | -16.7 |
| 75,000 | 9,822 | -681 | -6.9 | -1,150 | -11.7 |
| 100,000 | 15,794 | -923 | -5.8 | -1,302 | -8.2 |
| 125,000 | 22,904 | -1,337 | -5.8 | -1,888 | -8.2 |
| 1 Negative values indicate a
reduction in net tax paid to the federal government or an increase in federal
refundable credits (Canada Child Tax Benefit, goods and services tax credit). 2 Where individuals and families receive more in federal refundable credits than they pay in federal income tax, the federal income tax reductions are indicated in bold and represent an increase in net federal benefits they receive. Percentages are not meaningful so the dollar amounts are repeated. |
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Table A7.9
Typical Single Individual – 2000 Budget Annual Impacts
| Proposed 2000 budget | |||||
|---|---|---|---|---|---|
| Total income | Federal tax pre-2000 budget |
Total relief (2001)1 | Total relief as a % of federal tax2 |
Total relief (2004) | Total relief as a % of federal tax |
| $ | $ | $ | $/% | $ | $/% |
| 10,000 | 137 | -41 | -29.9 | -114 | -83.5 |
| 15,000 | 899 | -49 | -5.4 | -137 | -15.2 |
| 20,000 | 1,695 | -49 | -2.9 | -137 | -8.1 |
| 25,000 | 2,492 | -49 | -2.0 | -137 | -5.5 |
| 30,000 | 3,529 | -128 | -3.6 | -290 | -8.2 |
| 35,000 | 4,875 | -214 | -4.4 | -404 | -8.3 |
| 40,000 | 6,129 | -314 | -5.1 | -504 | -8.2 |
| 50,000 | 8,729 | -514 | -5.9 | -704 | -8.1 |
| 60,000 | 11,354 | -739 | -6.5 | -928 | -8.2 |
| 75,000 | 15,864 | -953 | -6.0 | -1,314 | -8.3 |
| 100,000 | 23,477 | -1,169 | -5.0 | -1,545 | -6.6 |
| 125,000 | 31,089 | -1,242 | -4.0 | -1,617 | -5.2 |
1 Negative values indicate a reduction in net tax paid to the federal government. |
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