Jim Flaherty's budget 're-do'
Monday's upcoming resurrected federal budget is expected to be nearly identical to the one tabled in Parliament last March but never passed because an election was called before a vote could be held on its contents. Finance Minister Jim Flaherty said the new budget "will restate all the same commitments from the March 22 budget."
Foreshadowing that Monday's budget will likely be nothing more than a redo, the traditional "Budget Secured Reading" for media, known informally as the "media lockup," has been shaved down to a mere two hours from the seven hours the media was given back in March to review the budget's contents before it was made public in the House.
That being said, there has been some hope expressed among certain groups that a couple of measures would be tweaked, if not altogether removed, from the updated budget.
The first relates to the donation of flow-through shares to registered charities. Flow-through shares are issued by oil and gas, mining and renewable energy companies that renounce or "flow through" their exploration, development and project startup expenses to their shareholders, who can deduct these expenses personally on their own tax returns.
Over the past couple of years, several promoters have packaged up flow-through donation deals, registering them as tax shelters. The promoters have teamed up with "liquidity providers" that step in and provide a guaranteed amount of upfront cash to the charities. Under one such deal, the true cost of getting $100 to the charity was approximately $18 to the donor.
March's federal budget contained a rule change that would effectively eliminate one of the biggest benefits of these donation deals. During the past couple of months, several groups have been trying to convince the government to rescind this new rule.
The other change that some groups hope will also get dropped on Monday concerns individual pension plans (IPPs), which are defined-benefit Registered Pension Plans established for small business owners and their spouse or other family members who are employed by the business. What has specifically angered both actuaries and small business owners is a change that would severely curtail the benefit of making past-service pension contributions to an IPP.
As Financial Post personal finance columnist Jonathan Chevreau wrote this week, several actuarial firms that together have established more than half of the IPPs in existence today have made representations to key government ministers and prepared a joint submission that asks the government to "rethink its proposed changes and to leave the IPP alone." The group called the changes proposed "deeply discriminatory to those considering implementing an IPP, and in terms of overall policy fundamentally capricious, as it will seriously jeopardize the ability of business owners and incorporated professionals to adequately save for retirement."
Will the government listen? All will be revealed this Monday.
One final late addition to the budget could be the formal introduction of income splitting, which would allow income sharing of up to $50,000 for couples with dependent children under 18, although this measure may not be formalized until the deficit is eliminated, as originally set out in the Tories' election platform.
That being said, there may be pressure on the feds to act quicker so as not to be outdone by their Ontario provincial counterparts. Last week, Ontario Progressive Conservative leader Tim Hudak announced that Ontario couples would be allowed to split up to $50,000 of income, regardless of whether or not they had kids. Ontario's measure would be introduced in the first mandate of a provincial Tory government, as opposed to the federal timeline, which is when the budget is balanced.