Federal Budget – Economic Action Plan 2015
As the final budget before the federal election, the 2015 federal budget – dubbed Economic Action Plan 2015 (EAP 2015) – contains tax-relief measures aimed at easing the financial burden of voters, particularly seniors who are the most likely age-group to visit the polls. To benefit seniors, the feds are relaxing the rules that govern Registered Retirement Income Funds and increasing the annual Tax Free Savings Account contribution to $10,000 from $5,500. Also as had been previously announced, EAP 2015 contains tax-relief for families through the expanded Universal Child Care Benefit, the “Family Tax Cut” and various other measures.
The tax rate for small businesses – firms with up to $500,000 in taxable income – will also be reduced to from 11% currently to 9% by 2019. Using data from the OCS 2015 Survey of Ontario’s ICI Construction Industry, we figure that this change could possibly impact approximately 20% of contractors in Ontario.
The federal government is projecting a $1.4 billion surplus for this fiscal year which is forecast to grow to $4.8 billion by 2019-2020.
Infrastructure Investments
EAP 2015 proposes smaller infrastructure commitments as a complement to their already-announced, larger infrastructure program.
Recall that in the 2013 budget, the government announced a new, 10-year, $53 billion Building Canada plan which started in 2014-2015. Meanwhile, in November 2014 they announced $5.8 billion over six years, starting in 2014-2015, to renew infrastructure assets and on-reserve schools across the country.
In EAP 2015, the federal government is proposing an additional $750 million over 2 years starting in 2017-2018 and $1 billion annually thereafter for a new Public Transit Fund. The fact that the $1 billion commitment is permanent makes it especially positive news. Under the new fund, the government will provide money to projects that use alternative financing and funding mechanisms that involve the private sector, including Public-Private-Partnerships (P3s). Additionally, they are putting forward a plan to create a new dedicated infrastructure fund to support the renovation, expansion and improvement of existing community infrastructure in all regions of the country as part of the Canada 150 celebrations. Further details on this fund will be made available in coming months.
Notably, the government observes that, in regards to the delivery of construction projects, “[t]here are a number of existing projects across the country that are being successfully implemented…that demonstrate that alternative approaches and working with the private sector produce value for taxpayers”. This indicates that they see value in models like the P3s.
Apprenticeship and Skilled Trades Support
The federal government is proposing to help the provinces and territories implement recommendations made by the Canadian Council of Directors of Apprenticeship to harmonize apprenticeship training and certification requirements in targeted Red Seal trades. This move is meant to reduce barriers to accreditation in the skilled trades and improve labour mobility so that apprentices can have their credentials recognized in all Canadian provinces.
Additionally, the government has pledged $1 million over 5 years starting this fiscal year for the Blue Seal Certification program. The program is designed to encourage journeypersons in the skilled trades to improve their business skills after they have achieved journeyperson status. Under the program, journeypersons can obtain a Blue Seal by completing 150 hours of study in one or more of 18 business-related subject areas offered by an approved training provider. After which, says the federal government, journeypersons will be better equipped to start their own business, thereby boosting apprenticeship hiring as well.
As a reminder, in last year’s budget the federal government introduced the Canada Apprentice Loan – which provides up to $4,000 in interest free loans to apprentices in a Red Seal trade – and the Flexibility and Innovation in Apprenticeship Technical Training (FIATT) pilot project meant to expand the use of innovative approaches for apprentice technical training.
Broader Labour Market Support
EAP 2015 proposes a one-time $65 million investment over four-years, starting in 2016-2017, to business and industry associations to support partnerships between employers and educational institutions and help them develop programs that make students job-ready. Additionally, they propose to support the Aboriginal labour market through programs like the Skills and Partnership Fund. They also pledge to help the nation’s youth receive education and training that better aligns them with the in-demand skills found in today’s labour market.
Importantly, the federal government is currently re-tooling their $1.95 billion per year Labour Market Development Agreements with provinces and territories to ensure that they are consistent with the needs of both employers and job-seekers.. Part of these changes would include the establishment of the Canada-Ontario Job Grant – in which the federal and provincial governments would each provide up to $10,000 per person toward the training cost of new employees or apprentices.
Support for Manufacturers
The federal budget proposes an array of measures meant to provide support to manufacturers including:
- providing depreciation allowances (i.e. accelerated capital cost allowance) meant to provide tax relief and stimulate investment over the next 10 years
- tariff reductions on imported machinery and equipment
- providing $100 million over 5 years for the Automotive Supplier Innovation Program to help Canadian automotive suppliers gain a competitive edge through new innovative products and processes
- working with industry and provincial stakeholders to develop a national aerospace supplier development initiative. The new program is intended to improve the performance and competitiveness of firms the sector.
- providing $2.5 million per year, starting in 2016-17, in support of the Defense Procurement Strategy.
For the construction industry, industrial investment is correlated to manufacturing activity, so any boost that manufacturers can receive, especially those that incent them to invest more like the accelerated capital cost allowance, may benefit construction going-forward.
Resource Industry Support
EAP 2015 affirmed the government’s intentions to support the nation’s resource industry by:
- providing accelerated capital cost allowance treatment for assets used in facilities that liquefy natural gas
- extending the 15% Mineral Exploration Tax Credit to benefit junior mining exploration firms
- allocating $135 million over 5 years to the Major Project Management Office Initiative which is meant to improve the efficiency and effectiveness of major project approvals.
- providing $22 million over 5 years, starting in 2015-2016 to the Targeted Geoscience Initiative. This program will support mining industries by developing knowledge and expertise to increase their competitiveness
- allocating $23 million over five years, starting in 2015-16, from Natural Resources Canada to develop technological innovation needed to separate and develop rare earth elements and chromite
- providing support to firms operating in the forestry sector
Bottom Line:
As the final budget before the federal election, there are several tax-relief measures aimed at appeasing would-be voters, particularly families with younger children and seniors. Small businesses, including construction contractors, should benefit from a reduction in the small-business tax rate.
From an infrastructure spending standpoint, EAP 2015 is basically steady-as-she goes with continuation of the Building Canada infrastructure plan, announced in the 2013 budget, complemented by smaller spending promises introduced this year. Amid some grumblings about the efficiency of P3’s from Ontario’s Auditor-General, it’s notable that the federal government continues their support of alternative construction delivery approaches which utilize the private sector, like Public-Private-Partnerships.
To read the 2015 federal budget, please visit:
http://www.budget.gc.ca/2015/docs/plan/toc-tdm-eng.html
FOR MORE INFORMATION, CONTACT:
Rishi Sondhi
Construction Information Coordinator
Ontario Construction Secretariat (OCS)
180 Attwell Drive, Suite 360, Toronto, ON M9W 6A9
P 416.620.5210 ext. 222
F 416.620.5310
EMAIL:
kjacobs@iciconstruction.com