http://www.globeinvestor.com/servlet/story/RTGAM.20070319.wbudgetcarrick20/GIStory/

Breaks for RESP contribution

A budget that's rated F for family
ROB CARRICK


Monday, March 19, 2007

OTTAWA — The federal Conservatives must have been channelling Walt Disney when they wrote this budget.

Canadian taxpayers have never seen anything as slickly packaged and family friendly in the extreme. There are no dramatics here, just an exercise in pleasing the crowd with some calculated plot twists.

Have any kids? You'll save up to $310 apiece starting this year thanks to the new child tax credit. Have a registered education savings plan set up to help pay for a child's college or university tuition? You're now in line to receive an extra $100 a year in grant money from Ottawa, and there are no more annual contribution limits. Families with a stay-at-home parent get a small tax benefit of their own, while parents of disabled children get their own version of the RESP.

There was no capital gains tax deferral in the budget — it wouldn't do much for families, especially ones that aren't rich. There were no broad-based income tax cuts, either. They're hard for people to track, and the experience of recent budgets shows they rarely save much more than a couple of hundred dollars.

Instead, the budget offers a few marquee attractions rated F for family. The centrepiece is the new child tax credit, which will trim $620 off the annual tax bill of a family with an income of $40,000 or more and two children under 18. By the tax-savings standards of recent budgets, that's significant. It's all the more tangible for parents of children under six, who are already benefiting from the Universal Child Care Benefit of $100 a month that was introduced in the 2006 budget.

RESPs are important to families struggling to afford the cost of a postsecondary education, so the government did something splashy with those in the budget. The annual $4,000 contribution limit for RESPs is history, and the lifetime contribution limit rises to $50,000 from $42,000.

People who scramble to keep up with big mortgages while making contributions to registered retirement saving plans probably don't have the cash to make full use of the new RESP rules. But they'll still be able to benefit from the budget through an increase in the federal grant money that Ottawa matches against RESP contributions by individuals. The annual amount of the Canada Education Savings Grant rises to $500 a year from $400. The grant provides 20 cents for every dollar you put in an RESP, so you'd need to contribute $2,500, up from $2,000, to get as much grant money as possible.

For parents of disabled children, there's the proposed new registered disability savings plan, or RDSP, which closely resembles the RESP. There's a lifetime $200,000 contribution limit on these plans, which benefit from a very generous federal grant that offers up to $3 for every $1 contributed.

Another family-friendly budget measure eliminates the so-called marriage penalty, which refers to the fact that one-earner families didn't get quite the same level of tax relief as two-earner families. To remedy this, tax credits for spouses with little or no income will be increased in such a way as to provide up to $209 in family-tax savings. Single parents and people caring for a dependent will also benefit.

Straying a bit from the family theme, the budget offers up a change that will be welcomed by seniors who remain in the work force and don't want to start drawing off their savings. They'll be able to convert their RRSPs into registered retirement income funds, or RRIFs, at age 71 instead of the current 69. The conversion age is a big deal because RRIFs require a minimum amount to be withdrawn every year, whereas RRSPs do not.

Older Canadians who remain in the work force will also benefit from a proposal for phased retirement that would allow people to simultaneously draw from a pension plan while also accruing benefits in the same plan as an employee.

The people most likely to call this Disney budget Mickey Mouse are those who were anticipating the government living up to its election promise to introduce a capital gains tax deferral. As advertised, the deferral would have let you sell stocks, bonds and properties like cottages without paying taxes on your profits if you reinvested the funds in fairly short order.

The only mention of capital gains in the budget was an increase in the lifetime capital gains exemption for small-business owners, farmers and fishermen to $750,000 from $500,000.

Also unlikely to enjoy this budget are people who invested in income trusts. The federal government introduced a new tax on income trusts last Oct. 31, and, while it won't kick in until 2011, it has driven down the price of most income trusts.

Any lingering hope that the Conservatives would soften their trust crackdown should now be gone. Even in a Disney budget, not everything ends happily.

© The Globe and Mail

http://www.globeinvestor.com/servlet/story/RTGAM.20070319.wbudgetbizreax20/GIStory/


'A very stimulative budget'
TAVIA GRANT


Monday, March 19, 2007

The federal budget Monday offered substantial tax breaks, along with incentives for fuel-efficient vehicles and breaks for the manufacturing sector. It also promised to alleviate the so-called fiscal imbalance among provinces and pay down debt. A selection of reactions from the business community:

Garth Whyte, executive vice-president of The Canadian Federation of Independent Business

“It's a big budget for small business.

“One [key part] is raising the life-time capital gains exemption from $500,000 to $750,000 for small business owners, fishers and farmers. And that's their retirement, if they hope to sell their business or pass on their business, that's really important to them…We delivered a month ago, 30,000 faxes to Finance Minister Flaherty to do this very thing, so he recognized that.

“They're also going to reduce the paper burden on small business, there's a target of 20 per cent, that's another big top priority for that because it caused a lot of stress, a lot of time, a lot of money to fill out these things.

“So there are a lot of things in here for entrepreneurs and small business owners, they recognize it, they acknowledge it in the budget and these are things that our members were calling for from the Finance Minister and he responded.

“They met and exceeded our expectations. If there's one caution, it's the creeping in spending. But by and large our members should be very happy with this budget.

Karen Atkinson, tax partner, Ernst & Young

“I think there's a lot in there for both businesses and individuals. From a corporate perspective, the enhanced ACCA (accelerated capital cost allowance) deductions will be welcomed, especially by the manufacturing sector but also for other sectors as well.

“There are also some very favourable provisions regarding the elimination of withholding tax on interest payments to non-resident creditors and that is certainly welcome news. It simply decreases barriers to the capital markets for Canadian companies and will be welcomed by many non-residents, someone who's looking to finance Canadian companies.

“The other aspect of the budget that won't likely be received as favourably by the business community is the elimination of the interest deductibility for certain foreign investments.

“It's very much a stimulative budget. There's a lot of spending that's been proposed.”

Ian Russell, president and CEO of the Investment Industry Association of Canada

“I'm surprised and somewhat disappointed. We were going in looking for capital gains tax relief in the budget and we'd been pushing very hard for that for the last two years and it really follows on a commitment that the minister had made very early on in his mandate to come forward with that kind of relief and it just wasn't there.

“We could have done a lot more to promote capital formation, capital raising, risk investment in the small business sector where external capital needs are high, and we just haven't done enough. And so that's what's a bit of a disappointment.

“There are many places in the budget where there really is a need for co-ordination among all levels of government in the tax system and also in regulation, particularly securities regulation. That presents challenges for the minister as well. But he deserves full marks for showing some leadership on the regulatory reform agenda, but it's contingent on the provinces moving in lock step.

“I thought the over-arching theme, going in, would have been on improving the competitiveness and the productivity of the Canadian economy to lay the foundation for strong, sustained growth, which are important for the social agenda in the longer term. While there were some steps taken, the minister could have gone further.

Glen Hodgson, chief economist at the Conference Board

“I think we can probably declare the fiscal imbalance between the Fed and the provinces over. Interesting though that the cities weren't addressed in any really material way. So the city fiscal issue still has yet to be addressed.

“There are a number of things that directly concern productivity...new investments, particularly in machinery and equipment and a commitment to improve ACCA rates. But you have to do a lot of things on a lot of fronts. But the budget recognizes that.

“Urban Canadians probably don't see as much in this budget as one would like because we haven't directly addressed the issue of the fiscal imbalance in our cities. They're still dependent upon transfers from two levels of government.

“It's absolutely a net plus for the country.

“Anybody who's making smaller, cleaner vehicles now has an advantage. And anybody who relies on larger gas guzzlers [doesn't].

“It seems to me that we may have reached the limits now as tax cuts as the core driver of an economic agenda, which arguably is a good thing. We're now seeing greater investment from all parties, in things like infrastructure and our cities. Now it's a matter of sufficiency — have we gone far enough?”

Jayson Myers, chief economist, Canadian Manufacturers and Exporters

“It's not everything, but it's a lot of what we were asking for and it will make a big difference. The two-year write-off for investment in manufacturing machinery and equipment, that was our big priority… It will provide some very good investment in new equipment and machinery.

“It's a manufacturers' budget. We're extremely pleased by it.”

Linda Hasenfratz, CEO of engine parts maker Linamar Corp. of Guelph, Ont.

“I think its a very good thing” to allow for a quicker write-down of manufacturing equipment. “It allows companies to depreciate those assets quicker, from a tax perspective, and improves the cash flow of those companies to continue to invest and grow.

“It will go right to the bottom line [and] that money gets reinvested into additional product development, process development and new technology to continue to grow the business.

Still it won't likely be enough to help companies that are on the edge of failure, she said. “Honestly, if you don't have the fundamentals in place of a decent strategy, and a solid manufacturing strategy, and a good commitment to product development, a bit of a tax break is not going to make or break you. It might sustain you for a period, but it's not going to be the answer to your dreams.”

Ms. Hasenfratz said she would like to see the tax break continue longer than the planned two years, but even the short term relief is valuable. “A temporary measure is better than none at all. It's a good first step and hopefully we'll see it implemented on a long-term basis.”

Douglas Porter and Michael Gregory, economists at the Bank of Montreal, in a note:

“The Conservative government's second budget has a surprisingly heavy tilt to increased spending versus new tax relief.

“The major source of mystery ahead of the budget was on the tax side, and the biggest surprise may have been what wasn't included today. There were no changes to marginal tax rates or the basic personal exemption, despite a stronger-than-expected fiscal backdrop — even with recent measures, Ottawa will still report a surplus of over $9-billion this year. And, with the wide variety of spending measures, Finance is still aiming for $3-billion budget surpluses in the coming years, and still has a bit left over in coming years for additional possible initiatives.

“On balance, the budget does not contain much for investors, as there were no changes to general capital gains and no new income splitting moves [apart from already announced measures for pensioners]. Of course, this is all based on the assumption that the budget will be passed by the minority parliament; we believe that the many spending measures in the budget and the fact that only one of the opposition parties need support the plan will see this budget through.

Thomas d'Aquino, chief executive and president of Canadian Council of Chief Executives

“Our country must compete on three fronts: people, ideas and investment. This budget launches important initiatives in all three areas, adding real muscle to the comprehensive competitiveness strategy laid out by the government last autumn.

“Federal measures alone will give Canada the third-lowest marginal tax rate on new business investment among G7 countries. If provincial governments do their share by eliminating their capital taxes and harmonizing remaining sales taxes with the GST, Canada would have the lowest rate in the G7 by a significant margin and an important competitive advantage in attracting new investment and jobs.

“We also welcome the budget's commitment to expanded public investment in research and commercialization, and the government's determination to focus support on areas in which Canada is or has the potential to become a global leader.”

Sebastien Lavoie and Carlos Leitao, economists at the Laurentian Bank of Canada, in a note

“The measures revealed in the budget show the federal government opted for debt reduction and an increase in federal spending [towards fixing fiscal balance] in the first place, leaving tax cuts as a second-tier priority this time.

“Going forward, a new theme that will be on the federal government's agenda is global capital markets. Indeed, the federal government plans to put forward a plan to increase efficiency in financial markets, including the possible creation of a common securities regulator.”

Dustin Reid, foreign-exchange strategist at ABN Amro , in a note about the currency market

“The key headline from today's Canadian budget is that it will likely have enough votes to get passed through Parliament. This should mean little to no interruption for the current Conservative Party government who should be able to continue governing with a minority status in Parliament. This, in turn, should mean that there is little medium-term impact to foreign-exchange markets or other asset classes.”

Craig Wright and Derek Holt, economists at Royal Bank of Canada, in a note

“The federal budget is a credible plan that is fiscally responsible, broadly based in its likely appeal, and modestly stimulative. A massive spending surge and broad-based tax relief target many interests, but still yield a commitment to fiscal balance and a declining debt-to-GDP ratio.

“There is a significant risk that this budget will not appease all interests and may not pass in its present form.

“Conservative economic and sensitivity assumptions weigh against the absence of wiggle room for downside surprises to the economy.”

With files from Tara Perkins and Richard Blackwell

There are lot more in this budget. This is indeed a family friendly budget and will help increase more tax savings, mobilize more investmnet and will also help to the business community.

-----------------------------------------------------------------
Live and Let Live. Together we can make a difference.

DP JAIN, CPA, CGA, CPA (US), CA(I), LL.B.(I)
416-305-0080
(Loans, Mortgage, Tax, Accounting, Investments)

All the politicians are the same globally. They are only concerned about the next election.

May be Stephan Dion has to do better to get elected. Some Ideas for you as inspired from Tamil Nadu Government are as follows:

All new immigrants a new Toyota Corolla car upon landing, guys with one year residency a car with a 37" Plasma TV and for every year completed till the Citizenship they get an additional goodie(s) like laptop, kitchnette and even a free piece of land in Saskatchewan.This way you can tie down the loyalty of your voter base.


But nothing is free as you would observed all these freebies from the Conservatives are coming from our EI which is sitting undisbursed a total of $51 Billion Dollars.

The same is also potrayed in the following TO Star article on the families of Sagors and the Patels.

http://www.thestar.com/News/article/193851

http://www3.thestar.com/static/PDF/070320_patel_family.pdf

THE MORAL OF THE STORY IS ROB PETER AND PAY PAUL.

-----------------------------------------------------------------
Speech by Thomas Friedman of The New York Times....

"When we were young kids growing up in America, we were told to eat our
vegetables at dinner and not leave them. Mothers said, 'think of the
starving children in India and finish the dinner.' And now I tell my
children: 'Finish your maths homework. Think of the children in India
who would make you starve, if you don't.'"