Worried about plunging oil prices? Ottawa isn’t
Federal Finance Minister Joe Oliver will provide Canadians with a fresh look at Ottawa’s financial health on Wednesday afternoon in the government’s annual fall fiscal update.
With a slew of measures preceding the address, don’t expect any major surprises, experts say.
“With a host of tax cut/benefit measures already announced, this will indeed serve as just a fiscal update and not a mini budget,” BMO economist Robert Kavcic said.
In general, Ottawa’s balance sheet is relatively healthy and is expected to begin generating a surplus of excess cash next year. One wildcard, however, is the impact fast-falling oil prices will have.
Crude’s sharp fall since the summer threatens to disrupt state financial projections as tax revenues from energy companies and other areas related to oil, like taxes at the pump, decline.
Global oil prices – which have slipped 25 per cent since their peak this year — are a “question mark,” BMO’s Kavcic said. Oliver is expected to address the impact of the slide Wednesday.
BMO estimates the drop will cost Ottawa billions in lost revenue, a shortfall that puts into question tax breaks announced by Prime Minister Stephen Harper earlier in the month.
Still, Kavcic, doesn’t foresee the decline taking a big enough chunk out of revenues to put the cuts in jeopardy.
In Montreal on Monday, Oliver hinted as much. The decline in crude “will affect our economy in a variety of ways and adversely impact our fiscal situation,” the minister conceded.
“Nevertheless, we remain confident that we will achieve a budgetary surplus next year,” Oliver said.
Ottawa “should be able to absorb the hit, leaving a run of surpluses in place,” Kavcic said.
Family Tax Cut
Harper unveiled a tax-cut package earlier this month led by the “Family Tax Cut,” which gives families with children income tax relief and additional money to cover costs.
The measures have been criticized by opposition parties and critics for their narrow focus and claims the moves disproportionately benefit higher income earners.
Here’s a look at the details of the tax breaks:
- Family Tax Cut, aka income splitting
This will allow a higher-income spouse to notionally transfer up to $50,000 of taxable income to a spouse in a lower tax bracket. This only applies if you have children under 18, and the benefit, which takes the form of a tax credit, is capped at $2,000.
- Increased Universal Child Care Benefit
The benefit will be increased to $160 per month, per child under age 6, from $100. It will also be expanded to cover those aged 6 through 17 ($60 per month).
- Child Care Expense Deduction
The deduction limit will be raised by $1,000, to $8,000, for children under 7 (i.e., daycare fees) in the 2015 tax year; to $5,000 from $4,000 for children aged 7 through 16; and the Disability Tax Credit will get a like-sized boost.
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