Canadian government pledges to improve the responsiveness of immigration system

In its budget for financial year 2008-09, the Canadian government has pledged $22 million investment over two years, growing to $37 million per year, to modernize the existing immigration system.

Canada’s immigration system has been in need of repair for many years. Due to the growing backlog of 850,000 applications, the immigration wait times has been surged more than 20 per cent since 2004. It is expected that the new funding will not only improve the responsiveness of Canada’s immigration system but also better align it with the immediate and longer-term needs of labor market.

This funding will be used to support immigration initiatives such as legislation to speed up the processing of permanent resident applications, ensuring shorter wait times and making Canada’s immigration system more competitive by improving Immigration and Refugee Protection Act (IRPA).

To improve the Canada’s competitive position, as outlined in Advantage Canada, budget 2008-09 will (a) support Canadian students with a $350 million investment in 2009–10, rising to $430 million by 2012–13, in a new, consolidated Canada Student Grant Program that will reach 245,000 college and undergraduate students per year when it takes effect in the fall of 2009; (b) commit $123 million over four years starting in 2009–10 to “streamline and modernize” the Canada Student Loans Program; (c) enhance the flexibility of Registered Education Savings Plans by increasing the time they may remain open to 35 years from 25 years, and by extending the maximum contribution period by 10 years; (d) provide $25 million over two years to establish a new Canada Graduate Scholarship award for top Canadian and international doctoral students; (e) provide $3 million over two years to establish a new international study stipend for Canada Graduate Scholarship recipients who wish to study at international institutions; and (f) strengthen the ability of Canadian universities to attract and retain top science leaders with $21 million over two years to establish up to 20 Canada Global Excellence Research Chairs.

A Tax-Free Savings Account will also be introduced, that allows Canadians to contribute up to $5,000 a year to the account. Investment income and capital gains will not be taxed and withdrawals will be tax-free. Budget 2008-09 will also expand the list of eligible expenses under the Medical Expense Tax Credit.

A higher-security electronic passport by 2011 with a validity period of 10 years is also announced. Budget 2008-09 is also committing $6 million to support plans to introduce enhanced driver’s license and $26 million to introduce the use of biometric data into visas issued to foreign national entering Canada.

Canada announced reduction in GST and other tax reliefs for individuals and businesses

The government of Canada has announed a broad-based tax relief for every Canadian individual and business as proposed in the Economic Statement of 2007. Due to this, taxes will fall by some CDN$190 billion over this and the next five fiscal years to their lowest level since the early 1960s.

As proposed, a reduction of an additional percentage point will reduce GST to 5 per cent, which was initially reduced from 7 to 6 per cent in Budget 2006. This reduction will be effective from January 1, 2008. The reduction of 2 percentage point in GST will amount to approximately CDN$12 billion total savings for consumers next year. The GST credit will be maintained at its current level, translating into more than CDN$1.1 billion in benefits annually for low- and modest-income Canadians.

Among other measures, the Government is proposing additional tax relief for individuals and families by (a) increasing the basic personal amount to $9,600 retroactive to January 1, 2007, with a further increase to $10,100 on January 1, 2009; (b) reducing the lowest personal income tax rate to 15 per cent from 15.5 per cent, retroactive to January 1, 2007; (c) introducing a new Working Income Tax Benefit; (d) eliminating income tax on elementary and secondary school scholarships; (e) enhancing the children's fitness tax credit; and (f) expanding the scope of the public transit tax credit.

To help Canadian businesses, government proposes to (a) reduce the general corporate income tax rate to 15 per cent by 2012, starting with a 1 percentage point reduction in the rate in 2008 beyond the already legislated reductions; (b) reduce the small business income tax rate to 11 per cent in 2008, one year earlier than scheduled; (c) increase the lifetime capital gains exemption for small business owners, farmers and fishers to $750,000; (d) increase the deductible percentage of meal expenses for long-haul truck drivers; (e) extend the mineral exploration tax credit; and (f) ease tax remittance and filing requirements for small business.

Due to this decline in business taxation will not only strengthen the economy but also encourage job creation. It is also expected that by 2012, Canada’s corporate income tax rate will be the lowest among the major industrialized economies.

The legislation also proposes to eliminate withholding tax on arm's length outbound interest payments to residents of all countries effective January 1, 2008. Based on the proposal in Budget 2007 and building on the Protocol to the Canada-U.S. Tax Treaty signed September 21, 2007, this major step forward in Canada's international tax policy will increase access to foreign capital markets and reduce costs for Canadians and Canadian businesses that borrow from foreign lenders.