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By Carla Wilson
Victoria Times Colonist staff
With files From The Canadian Press
Thursday, February 24, 2005
Federal budget tax breaks and business benefits are being welcomed but those in the business community point out that a large chunk of these measures won’t fully be in place for a few years.
Adrian Mastracci, investment counsel at Vancouver’s ‘fee-only’ KCM Wealth Management, says, "There’s a little bit of something for everyone but not a lot to get excited about. The higher RRSP limit is not going to mean a lot to investors unless they are in a high-income group.”
“We would be happier if they were. taking effect sooner rather than later,” said Laura Jones, vice-president of the Canadian Federation of Independent Business’s B.C. and Yukon office.
This is clearly a pre-election budget, Jones said from Vancouver on Wednesday. “There is something in this budget for everyone and that includes small business.”
She’s disappointed that “for every $1 in tax cuts, there is $3 in program spending.”
But news that the corporate surtax is being eliminated will mean substantial savings for business, even though it won’t happen until 2008, Jones said. The move to cut the corporate income tax rate to 19 per cent from 21 per cent by 2010 is more good news, but again there’s a wait.
Applause goes to the government for presenting a five-year plan, something that most of the federation’s members had wanted for security and certainty, Jones said.
Praise also goes to increasing the basic personal amount an individual may claim before paying income tax. It moves to $10,000 by the 2009 taxation year from the current $8,012. Another thumbs-up goes to the move to increase RRSP limits to $22,000. “It (an RRSP) is often the only retirement vehicle that a small business person has,” she said.
Bruce Carter, chief executive officer of the Greater Victoria Chamber of Commerce, said the $13 billion allocated to the military over five years will help the local economy.
Businesses will be more competitive once the corporate surtax is gone and the corporate tax rate is reduced, he said.
The $389 million to help immigrants settle in Canada will help address today’s skills and labour shortage, Carter said.
Grant Kratofll, a chartered accountant with Lee and Sharpe, was disappointed he did not see a change in the corporate income tax rate for investment income, which tops out at 49.3 per cent. In BC, the top personal rate is 43.6 per cent.
The top corporate rate should be brought in line with the top personal tax rate, he said.
“There’s really a disincentive now to have investment income in a corporation,” he said. Fairness would require that “A. dollar earned in a corporation should basically be the same as a dollar earned personally.”
He too praised the decision to eliminate the 30 per cent limit on foreign investments for pension plans and retirement savings plans. “It’s more fair just to let people choose. I don’t see that as really hurting or detracting from the Canadian economy.”
Jock Finlayson, executive vice-president of policy for the Business Council of BC, sees a number of good measures in the budget but said that overall it is too heavily weighted to spending increases, rather than tax relief and debt reduction.
He likes the move to lower the corporate tax rate and kill the surtax but said the problem is they don’t begin for a few years. “It sort of begs the question of ‘who is going to be the government?”’
The notion of removing low-income people from tax rolls is something the council supports and lifting the basic exemption is one way to do that, Finlayson said.
“We were pleasantly surprised by the initiatives on RRSPs.” He agrees with both the increase to the contribution limit and the immediate end to the foreign property limit. “Which up until now has con-strained both pension funds and individuals managing their RRSPs to properly diversify,” he said.
Adrian Mastracci, columnist and investment counsellor at Vancouver’s KCM Wealth Management Inc., said there’s a little bit of something for everyone but not a lot to get excited about. He’s another who would have preferred to see more measures brought in earlier.
The higher RRSP limit is not going to mean a lot to investors unless they are in a high-income group, he said.
Manufacturers facing a higher dollar are “screaming” right now. “They are just having a horrible time from a profit point of view.” Removing the corporate surtax is good news to corporations but “Had it started this year, it would have been far better,” he said.
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