It took a couple of days to parse Budget 2013 to see what Canadians can really expect from that budget.
And we are in for a surprise — nearly $8 billion in tax increases affecting consumers, small businesses, credit unions and labour-sponsored investment funds.
For consumers, media leaks before the budget was tabled made it sound like this budget would save families a lot of money by reducing tariffs on sports equipment. But further on in the budget, and not highlighted in Conservative talking points, was a decision to raise the tariffs on many more imports, like clothing and bicycles, from countries that used to have a preferential status, including China.
The real fear is that this will increase the cross-border price gap with American retailers. While U.S. duties remain at six per cent, Canadian duties will increase to 13 per cent. For small retailers living close to the border, this may affect sales.
And the government has decided that hospitals must now charge GST on parking fees, increasing the costs for anyone who needs to visit a hospital regularly.
In British Columbia, the Working Opportunity Fund operates as a labour-sponsored investment fund and it will see a phase-out of the federal tax credit by five per cent a year until it is eliminated in 2017.
According to its recent market commentary, since 1992, the Working Opportunity Fund invested more than $585 million in 133 British Columbia companies.
Two of the breakthrough technologies developed as a result of those investments were voice recognition systems in automobiles that were developed at University of British Columbia and then commercialized by a spinout company. Another company developed more durable stents for heart surgeries by using a drug coating.
While junior exploration companies still benefit from flow-through shares as a form of tax credit, technology companies will lose out because these investment funds will have more difficulty raising needed venture capital.
Credit unions are facing an increase in taxes of more than $200 million by the cancellation of a long-standing tax provision that helped them compete with large banks. Since credit unions do not have access to capital markets, and there was some recognition that they served smaller, under-served communities and markets and that was important to Canadian society, they were treated differently than banks and had a smaller income tax rate. Not all credit unions were eligible for the reduced income tax — those whose retained earnings were above a certain threshold were already paying more taxes.
But with the elimination of the lower rate over the next five years, some smaller credit unions and their customers will feel the pinch of increased taxes.
It is a shame that the Conservatives continue to tell Canadians one thing — “we’re lowering taxes” — while doing the exact opposite.