The federal government tabled its 2022 budget in the House of Commons, yesterday, following several years of extraordinary government spending in response to the COVID-19 pandemic.
Budget 2022 attempts to address the increased cost of living and affordability issues for Canadians and highlights targeted investments in innovation, and the green economy. The budget also underscores current uncertainties including the Russian invasion of Ukraine, supply chain disruptions, and the threats to global growth from both. This budget is also the first test of strength for the recent “Supply and Confidence” pact entered into between the governing Liberals and the opposition New Democrats.
Small Business
The budget raises the capital threshold to qualify for the lower small business tax rate of 9%, from $15 million to $50 million, before the 15% tax rate takes effect. The Government’s position is that change will benefit medium-sized businesses and result in $660 million in tax savings over five years.
Small businesses continue to struggle after over two extremely difficult years and face a host of higher costs and COVID-related debt. Budget 2022 ends most if not all COVID support programs, with Finance Minister, Chrystia Freeland declaring: “The time for extraordinary COVID support is over.”
Growth and Innovation
The Federal budget includes several measures to boost lagging Canadian ingenuity with a focus on growth and innovation.
Without much detail, the budget indicates the government’s plan to establish a permanent Council of Economic Advisors to help generate policy options and advice on strengthening Canada’s prospects for long-term economic growth. Buttressing this initiative is the government’s commitment to establishing an independent federal innovation and investment agency to work with Canadian industries and businesses with a view to supporting the scaling of investments in innovation and research and development to make Canada a global leader in this arena.
The budget also proposes to establish the Canada Growth Fund to attract private international capital and investment to Canada. The fund will be initially capitalized at $15 billion over the next five years, and will operate independently from the federal government.
Chasing Carbon
Commencing 2022 through to 2030, companies that invest in equipment that extracts carbon out of the environment can apply for tax credits of 35 percent, 50 percent, and 60 percent, depending on the nature of the equipment acquired. The government is so confident in the likely uptake of this technology that the budget estimates the credits will cost $2.6 billion annually over the first five years, and then $1.5 billion per year through 2030. The credits will be axed in half come 2031- so companies should start the carbon chasing process now.
For further insight into budget 2022 and how it may affect you- please reach out to Tanya Kuzman, Associate Lawyer, Mills & Mills LLP.
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