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Budget 2001 - Budget Plan Annex 2 |
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2001 | 2002 | |
---|---|---|
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(billions of dollars) |
||
Total Tax Relief |
17.3 |
19.9 |
14.4 |
15.7 |
|
0.5 |
1.4 |
|
2.4 |
2.8 |
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This annex provides an overview of income tax relief in place for 2001, as well as information about further tax relief for 2002 and beyond.
The Government’s tax reduction plan includes tax relief for individuals (see Table A2.4) and measures to encourage job creation, growth, entrepreneurship and innovation (see Table A2.5).
The measures announced in the Government’s tax reduction plan have been legislated and will continue to deliver significant tax relief in 2002 and subsequent years.
In 2002 tax filers will continue to benefit from indexation of the tax system (see Tables A2.2, A2.3 and A2.6). The indexation factor for 2002 is 3 per cent. All indexed personal income tax parameters will be adjusted by this factor. This will reduce the tax burden for all taxpayers. It will also increase the value of benefits for low-income families and individuals provided by refundable credits such as the CCTB and the goods and services tax credit (GSTC).
Indexation will raise the income thresholds for all tax brackets in 2002. For example:
Indexation also ensures that the value of tax assistance for seniors, people with disabilities and caregivers will rise in 2002.
Table A2.2 shows income thresholds and selected credit amounts as indexed for 2002.
Table A2.2
Selected Personal Income Tax Parameters
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2001 |
2002 |
|
---|---|---|
|
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(dollars) |
||
Basic personal amount |
7,412 |
7,634 |
Spousal/equivalent-to-spouse amount |
6,293 |
6,482 |
Taxable income at which 22-per-cent bracket begins |
30,754 |
31,677 |
Taxable income at which 26-per-cent bracket begins |
61,509 |
63,354 |
Taxable income at which 29-per-cent bracket begins |
100,000 |
103,000 |
Age amount |
3,619 |
3,728 |
Disability amount |
6,000 |
6,180 |
Disability amount supplement for children with severe disabilities |
3,500 |
3,605 |
Caregiver amount |
3,500 |
3,605 |
Infirm dependant amount |
3,500 |
3,605 |
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Note: See Table A2.6 for a complete list of indexed parameters. |
Indexation not only protects Canadians from automatic tax increases caused by inflation, it also means that the value of benefits for low-income families and individuals, such as the CCTB and the GSTC, will rise in 2002.
Table A2.3 shows benefit amounts and selected thresholds as indexed for 2002.
Table A2.3
Canada Child Tax Benefit and Goods and Services Tax Credit Parameters
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July 2001 |
July 2002 |
|
---|---|---|
|
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(dollars) |
||
Maximum benefit |
||
First child |
2,372 |
2,444 |
Second child |
2,172 |
2,238 |
Third child |
2,097 |
2,160 |
Additional benefit for third and subsequent child(ren) |
78 |
80 |
Additional benefit for children under 7 years |
221 |
228 |
Adult maximum |
207 |
213 |
Child maximum |
109 |
112 |
Single supplement |
109 |
112 |
Phase-in threshold for the single supplement |
6,710 |
6,911 |
Family net income at which GSTC begins to phase out |
26,941 |
27,749 |
|
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Note: See Table A2.6 for a complete list of indexed parameters. |
Canadian taxpayers will benefit considerably in 2002 from the Government’s tax reduction plan. For instance, relative to what their income taxes or benefits would have been without the Government’s tax reduction plan:
Beyond 2002 further measures have been legislated to provide tax relief. By 2004 these measures will:
Table A2.4 provides a summary of tax relief measures for individuals under the Government’s tax reduction plan.
Businesses will also see further tax relief in 2002 and subsequent years.
On January 1, 2002, the general corporate income tax rate, which applies to the highest-taxed sectors such as services, will be cut by 2 percentage points to 25 per cent.
This cut builds on the 1-percentage-point reduction already in place for 2001, and will be followed by additional legislated 2-percentage-point cuts in each of the following two years. By 2004 the general rate will be reduced to 21 per cent. This will encourage job creation and growth, reward entrepreneurship and innovation, and improve the international competitiveness of our business environment.
Small businesses are already benefitting from the full rate reduction to 21 per cent on business income between $200,000 and $300,000.
The reduction in the general corporate tax rate applies to sectors, such as services, that were the highest taxed. Manufacturing and processing (M&P) income was already taxed at a lower rate. For this reason, the corporate tax rate for M&P income was not reduced. Similarly, the corporate tax rate that applies to resource income was not reduced as the resource sector benefits from a number of sector-specific tax measures. The Government has engaged in extensive consultations on means to extend the lower corporate tax rate to resource income while at the same time improving the tax structure. These consultations are continuing.
The combination of federal and provincial actions will result in the average general rate of corporate taxation (taking into account capital taxes) in Canada being about 5 percentage points below the U.S. average rate by 2005 (see chart below).
As the summary box below shows, corporate tax rate cuts combined with other measures in the Government’s tax reduction plan are creating a business advantage for Canada relative to the U.S.
The Canadian Advantage |
Large- and medium-sized businessesFive-percentage-point lower average corporate tax rate in Canada than in the U.S. by 2005. Small businessesSignificantly lower coprorate rates in Canada on income above $75,000. Capital gainsTwo-percentage-point lower average top capital gains tax rate in Canada than the typical top capital gains tax rate in the U.S. The $500,000 lifetime capital gains exemption on small business shares has no equivalent in the U.S. Research and DevelopmentA 20-per-cent research and development (R&D) tax credit in Canada for all R&D expenditures compared to the U.S. 20-per-cent tax credit, which is only for incremental R&D. A 35-per-cent refundable tax credit available to smaller Canada-controlled private corporations; no equivalent in the U.S. |
Table A2.4
Summary of Tax Relief Measures for Individuals
Under the Government’s Tax Reduction Plan
Table A2.5
Summary of Measures for Jobs, Growth, Entrepreneurship and Innovation Under the Government’s Tax Reduction Plan
Table A2.6
Detailed List of Indexed Personal Income Tax Parameters
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Pre-2000 budget |
2001 | 2002 | |
---|---|---|---|
|
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(dollars) |
|||
Personal amounts and bracket thresholds |
|||
Basic personal amount |
7,131 |
7,412 |
7,634 |
Spousal/equivalent-to-spouse amount |
6,055 |
6,293 |
6,482 |
Net income threshold |
606 |
630 |
649 |
Taxable income at which |
29,590 |
30,754 |
31,677 |
Taxable income at which |
59,180 |
61,509 |
63,354 |
Taxable income at which |
n/a |
100,000 |
103,000 |
Credit amounts to reflect needs |
|||
Infirm dependant amount |
2,353 |
3,500 |
3,605 |
Net income threshold |
4,778 |
4,966 |
5,115 |
Caregiver amount |
2,353 |
3,500 |
3,605 |
Net income threshold |
11,500 |
11,953 |
12,312 |
Disability amount |
4,233 |
6,000 |
6,180 |
Disability amount supplement for children with severe disabilities |
n/a |
3,500 |
3,605 |
Allowable child care and |
n/a |
2,050 |
2,112 |
Medical expense tax credit |
1,614 |
1,678 |
1,728 |
Refundable medical expense |
500 |
520 |
535 |
Minimum earnings threshold |
2,500 |
2,598 |
2,676 |
Family net income threshold |
17,419 |
19,705 |
20,296 |
Age amount |
3,482 |
3,619 |
3,728 |
Net income threshold |
25,921 |
26,941 |
27,749 |
Old Age Security repayment threshold |
53,215 |
55,309 |
56,968 |
Goods and services tax credit (GSTC)1 |
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Adult maximum |
199 |
207 |
213 |
Child maximum |
105 |
109 |
112 |
Single supplement |
105 |
109 |
112 |
Phase-in threshold for the single supplement |
6,456 |
6,710 |
6,911 |
Family net income at which GSTC |
25,921 |
26,941 |
27,749 |
Base benefit |
1,020 |
1,117 |
1,151 |
Additional benefit for third child |
75 |
78 |
80 |
Additional benefit for children |
213 |
221 |
228 |
Family net income at which CCTB |
29,590 |
32,000 |
32,960 |
First child |
955 |
1,255 |
1,293 |
Second child |
755 |
1,055 |
1,087 |
Third child |
680 |
980 |
1,009 |
Family net income at which NCB |
20,921 |
21,744 |
22,397 |
Family net income at which NCB |
29,590 |
32,000 |
32,960 |
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1 GSTC and CCTB benefits are paid on a benefit year cycle beginning in July. |
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Last Updated: 2001-12-10 |