2007 Provincial Budget

Alberta Budget

The Alberta Budget was presented on April 19, 2007. In spite of an estimated surplus of $2.2 billion for 2007 - 2008, no major tax cuts were announced. The provincial tax rate has now remained at 10% since 2001.

Students will nevertheless be happy to learn that that the education amount will be increased for 2007. The full-time education amount will be increased from $475 to $600 per month and the part-time education amount will be increased from $143 to $180 per month.

Taxpayers who donate to charities will also have their generosity rewarded. For 2007, the non-refundable tax credit rate for donations in excess of $200 will be increased from 12.75% to 21%.

The provincial tax system is indexed to inflation. As a result, the non-refundable tax credits will be adjusted by 3.6% for 2007. A table showing the increases to the non-refundable tax credit block over the past three years is shown below.

Non-Refundable Tax Credit	2005	2006	2007
Alberta Non-Refundable Tax Credits
Basic	$14.523	$14,899	$15,435
Age Threshold	4074 30,331	4,152 30,907	4,301 32,020
Spouse or common-law partner / amount for an eligible dependant	14,523	14,899	15,435
Infirm dependants age 18 or older Threshold	3,940 5,591	4,015 5,697	4,160 5,902
Adoption expenses (maximum claim)	10,000	10,190	10,557
Pension income amount	1,126	1,147	1,189
Caregiver Threshold	3,940 13,457	4,015 13,713	4,160 14,207
Disability	6,755	6,883	7,131
Disability supplement Child care expense threshold	3,940 2,308	4,015 2,352	4,160 2,437
Education amount Full time Part-time	450 135	459 138	600 180

Since July of last year the Alberta Family Employment Tax Credit has also been indexed to inflation. The July 2007 payments will therefore also be adjusted accordingly.

Manitoba Budget

The Manitoba budget was presented on April 4, 2007. It proposed a number of minor tax reductions summarized in the table below.

The following income tax measures may also be of interest:

2007	2008	2009	2010	2011
Proposed Tax Reductions
10.9% of taxable income up to $30,544	10.9% of taxable income up to $30,544	10.8% of taxable income up to $31,000	10.7% of taxable income up to $32,000	10.5% of taxable income up to $35,000
13% of taxable income between $30,544 and $65,000	12.75% of taxable income between $30,544 and $66,000	12.75% of taxable income between $31,000 and $67,000	12.75% of taxable income between $32,000 and $68,000	12.75% of taxable income between $35,000 and $70,000
17.4% of taxable income in excess of $65,000	17.4% of taxable income in excess of $66,000	17.4% of taxable income in excess of $67,000	17.4% of taxable income in excess of $68,000	17.4% of taxable income in excess of $70,000

Whether or not the reductions will come to pass may depend on whether the government retains power in the provincial election expected sometime later this year.

Personal Amount Increases

The following increases are also proposed to the personal amounts, effective for 2008:

The basic personal amount will be increased from $7,834 to $8,034; and
The spouse or common-law partner amount and the amount for an eligible dependant amount will be increased from $6,482 to match the basic personal amount of $8,034.

Since the Manitoba tax system is not indexed to inflation, the other amounts will remain unchanged.

Manitoba Family Tax Benefit

Effective for 2008, the Manitoba Family Tax Reduction will be eliminated and replaced by a new personal amount called the "Family Tax Benefit." According to the budget papers, the change will not result in reduced benefits for any taxpayers.

Pension Income Splitting

Manitoba will match the new federal pension income-splitting measures introduced for 2007, allowing taxpayers to transfer up to 50% of eligible pension income to a lower-income spouse or common-law partner.

Children's Fitness Tax Credit

A provincial Children's Fitness Tax Credit will be introduced for the 2007 taxation year to match the new federal credit. As in the case of the federal credit, it will be based on a maximum of $500 of registration fees in eligible sports or recreational programs for children under the age of 16. In the case of disabled children, the claimable amount increases to $1,000 and the age limit increases to $1,000.

Education Property Tax Credit Increase

The base amount for the Education Property Tax Credit will be increased from $400 to $525 for 2007 and subsequent taxation years. Most homeowners will have the additional amount deducted from their property tax bills. Renters will get it when they file their 2007 tax returns.

Manitoba Mineral Exploration Tax Credit

The Manitoba Exploration Tax Credit will be extended for one more year to March 31, 2008.

Green Energy Manufacturing Tax Credit

A new Green Energy Tax Credit will be introduced for 2007 to encourage the production of new machinery and equipment used to generate renewable energy. It will be equal to 10% of the value of qualifying property produced and sold for residential or commercial use in Manitoba before 2019. Qualifying property will include equipment used to generate wind power, solar energy, geothermal energy, and hydrogen fuel cells.

Corporate Tax Cuts

The general corporate tax rate will be reduced from 14% to 13% effective July 1, 2008 and to 12% effective July 1, 2009.

The small business tax rate will be reduced from 3% to 2% effective January 1, 2008 and to 1% effective January 1, 2009. The dividend tax credit mechanism will be modified to take these reductions into account.

New Brunswick Budget

The New Brunswick budget was presented on March 13, 2007. Bucking the trend of recent years, it proposed the following tax increases that will take effect retroactive to January 1, 2007.

2007 (Before Budget)	2007 (After Budget)
Tax Increases
9.68% of taxable income up to $34,186	10.12% of taxable income up to $34,186
14.82% of taxable income between $34,186 and $68,374	15.48% of taxable income between $34,186 and $68,374
16.52% of taxable income between $68,374 and $111,161	16.8% of taxable income between $68,374 and $111,161
17.84% of taxable income in excess $111,161	17.95% of taxable income in excess $111,161

You will not notice the increases until July, 2007 when the payroll deduction tables are adjusted.

Low-income Seniors' Benefit

The Low-income Seniors' Benefit is paid to taxpayers age 60 or over who were residents of New Brunswick at the end of the previous year and received an OAS supplement. Effective April 1, 2007, it will be doubled from $100 to $200.

Taxpayers must apply for the benefit by filing an application form with the Revenue and Taxation Division of the New Brunswick Department of Finance. The application period is April 1 to November 30.

Small Business Investor Tax Credit

Effective March 13, 2007, the Small Business Investor Tax Credit will be enhanced by:

Increasing the size of the allowable investment for the 30% credit from $50,000 to $80,000 (with the result that the maximum credit will increase from $15,000 to $24,000);
Broadening the type of shares issued to include convertible, preferred shares; and
Increasing the size of business that is eligible to participate in the program from $25 million in net tangible assets to $40 million.

In order to claim this credit, you must have an NB-SBITC-1 Certificate.

Corporate Tax Increases

Effective January 1, 2007, the small business corporate income tax rate will be increased from 1.5% to 5% and the income threshold eligible for the small business rate will be reduced from $475,000 to $400,000. The rate was originally scheduled to drop to 1% effective July 2007 and the threshold was scheduled to increase to $500,000.

The provincial general corporate tax rate was originally scheduled to be reduced from 13% to 12% effective January 1, 2007. It will now remain at 13%.

Newfoundland and Labrador Budget

The Newfoundland & Labrador budget was presented on April 26, 2007. It contained a number of significant tax cuts which, according to the government, will be the largest in the province's history.

Taxpayers will notice the changes beginning with their July paycheques, at which time:

The lowest tax rate will be reduced from 10.57%to 8.7%;
The middle tax rate will be reduced from 16.16% to 13.8%;
The highest tax rate will be reduced from 18.02% to 16.5%; and
The 4.5% surtax for higher-income earners will be eliminated.

Beginning in July, the provincial tax system will also be indexed to inflation for the first time since the province moved to the Tax-on-Income System (TONI) in 2001. This will result in an increase to the tax bracket thresholds, the non-refundable tax credit amounts (with the exception of the pension income amount and education amounts) and other parameters used to calculate provincial tax.

A comparison of the changes to the non-refundable tax credit block for 2006 to 2008 is shown below:

Personal Amount	2006	2007	2008*
Basic	$7,410	$7,484	$7,634
Age Threshold	3,482 25,921	3,517 26,180	3,587 26,704
Spouse or common-law partner / amount for an eligible dependant Threshold	6,055 606	6,116 612	6,238 625
Infirm dependants age 18 or older Threshold	2,353 5,057	2,377 5,108	2,425 5,210
Caregiver Threshold	2,353 11,500	2,377 11,615	2,425 11,847
Disability	5,000	5,050	5,151
Disability supplement	2,353	2,377	2,425
Medical expense 3% of net income threshold	1,614	1,630	1,663
*The 2008 amounts assume a provincial inflation rate for the period September 2006 to September 2007. The actual rate may be more or less than this amount.

The Low Income Tax Reduction thresholds will be adjusted from $12,000 to $13,000 for individuals and from $19,000 to $21,000 for families, retroactive to January 1, 2007. Beginning in 2008, these income thresholds will also be indexed to inflation.

Seniors' Benefit

Effective for 2007, the income thresholds for the Newfoundland & Labrador Seniors' Benefit will be increased from a family income range of $15,032 to $21,482 to a family income range of $25,000 to $31,587. The purpose of this increase is to prevent the benefit from being reduced where the taxpayer is receiving the OAS Guaranteed Income Supplement. According to the budget papers, the number of senior couples that will receive the benefit as the result of this change will increase from 1,100 to 7,000.

Newfoundland & Labrador Child Benefit

Effective for the July 2007 to June 2008 benefit period, the Newfoundland & Labrador Child Tax Benefit rate will be increased by $5 a month per child.

The Mother Baby Nutrition Supplement will also be increased by $15 a month.

Corporate Tax Changes

Effective for 2007, the corporate small business income threshold at which the lower tax rate of 5% applies will be increased from $300,000 to $400,000 to match the federal threshold.

Northwest Territories Budget

The Northwest Territories budget was tabled on February 8, 2007. It contained no new tax measures.

Nova Scotia Budget

The Nova Scotia budget was presented on March 23, 2007. No significant new tax measures were announced. However, the government did state that it would continue to increase the personal amounts over the next several years according to the schedule proposed in last year's budget. This schedule is reproduced below.

Personal Amount	2006	2007	2008	2009
Personal Amount Increases
Basic	$7,231	$7,481	$7,731	$7,981
Spouse / Common law Partner	6,140	6,352	6,565	6,778
Eligible Dependant	6,140	6,352	6,565	6,778
Caregiver	4,176	4,320	4,465	4,610
Infirm Dependants	2,386	2,468	2,551	2,633
Age Amount	3,531	3,653	3,775	3,897
Pension Income Amount	1,000	1,035	1,069	1,104
Disability Amount	4,293	4,441	4,596	4,738

Post-secondary Graduate Tax Credit

Effective for the 2007 taxation year, the Post-secondary Graduate Tax Credit will increase from $1,000 to $2,000. This was a new credit introduced in 2006 for students who decide to take up residence in Nova Scotia after graduating.

Volunteer Firefighters Tax Credit

Effective for the 2007 taxation year, the government will introduce a new $250 refundable tax credit for volunteer firefighters. The credit will increase to $375 for 2008 and $500 for 2009.

Nunavut Budget

The Nunavut budget was tabled on March 7, 2007. It contained no new tax measures.

Ontario Budget

The Ontario budget was tabled on March 22, 2007. No significant new tax changes were announced. However, it contained a number of measures that will benefit families and lower-income taxpayers.

New Child Benefit

The government announced the introduction of a new Ontario Child Benefit (OCB) to be phased in over a period of five years. When fully implemented, it will replace the existing benefits for children paid to social assistance recipients under the Ontario Works and Ontario Disability Supports programs and to lower-income wage earners under the Ontario Child Care Supplement for Working Families (OCCS).

The first OCB payment will be made in July 2007. It will consist of a flat $250 for every child under the age of 18 in that month and will be reduced by 3.4% of adjusted family net income over $20,000. Because this is in the nature of a "down payment," to use the government's terminology, it will be made in addition to social assistance and OCCS payments.

Beginning in July 2008, OCB payments will begin to be paid monthly. The maximum annual entitlement will be $600 for every child under the age of 18. This will be reduced by 8% of adjusted family net income in excess of $20,000. Social assistance benefits will be restructured so that they are consolidated with the OCB. The OCCS will also be consolidated with the OCB. However, if a family's OCCS entitlement is larger than their OCB payment, the family will still receive the extra OCCS benefit.

Once the OCB is fully implemented in July 2011, the OCCS will be phased out over seven years. By this time, the maximum annual OCB entitlement will be $1,100 per child.

Social Assistance Recipients

The Ontario Works and Ontario Disability Support Program rates will increase by 2%, effective November 2007.

The government also announced that these benefits will not be reduced by the Working Income Tax Benefit proposed in the federal budget of March 19, 2007.

Seniors

For the past several years, the net income threshold at which credits begin to be reduced for seniors who are married or living common-law at the end of the year has been increased so that the credit is not reduced because of the OAS Guaranteed Income Supplement. The government announced that the threshold would be adjusted again later this year when it is known what the total amounts are for OAS and GIS payments in 2007.

The government also announced that it would parallel the pension income splitting provisions for seniors announced by the federal government announced last year and reaffirmed in the March 19 budget.

The government is also proposing the introduction of a new Life Income Fund (LIF) for seniors whose retirement savings are currently locked in. This will provide them with the same flexibility in handling their retirement savings as RRIFs. Taxpayers with locked-in employment pensions will be able to transfer up to 25% of their funds to these plans.

Implementation of these new plans could begin as early as January 2008.

Prince Edward Island Budget

Unlike the federal tax system and the tax system of most provinces, the PEI tax system is not indexed to inflation. As a result, the tax bracket thresholds and the personal amounts have remained unchanged since 2001. The budget of April 10, 2007 proposed to alleviate this so-called "bracket creep" to a partial extent by allowing a 2% increase for 2007 and an additional 4% increase for 2008.

The following additional personal tax measures were also proposed:

A doubling of both the full-time and part-time education amounts.
An unspecified reduction in the high-income surtax.
The introduction of measures to parallel the federal proposals for pension income splitting.

The government also reiterated its intention to lower the corporate small business tax rate to 1% by 2010. At present, the rate is 4.3%.The government is expected to call an election some time this summer. If so, the implementation of these measures will be dependent on the election outcome.

Quebec Budget

The Quebec budget was tabled on February 20, 2007, prior to the provincial election being called. With the election resulting in a minority government, it was not known at the time of writing whether all the measures would be adopted.

Increased Taxable Income Thresholds

The budget proposed to increase the taxable income thresholds as follows, effective January 1, 2008:

	2007	2008 (Before the budget)	2008 (After the budget)
16%	Taxable income not exceeding $29,290	Taxable income not exceeding $29,875	Taxable income not exceeding $32,000
20%	Taxable income between $29,290 and $58,595	Taxable income between $29,875 and $59,765	Taxable income between $32,000 and $64,000
24%	Taxable income in excess of $58,595	Taxable income in excess of $59,765	Taxable income in excess of $64,000

Effective 2009, these thresholds will be indexed according to the rate of inflation.

Refundable Tax Credit to Support Education Savings

To encourage parents to save for their children's post-secondary studies, the federal government has established the Canadian Education Savings Grant. This provides an additional 20% grant on the first $2,000 of contributions to an eligible RESP with a qualified beneficiary. As a result of changes that began in 2005, the rate is also increased on the first $500 of contributions to:

40% if the family's qualifying net income for the year does not exceed $36,378; or
30% if the family's qualifying net income for the year is greater than $36,378, but less than $72,756.

Quebec will also provide assistance to families who contribute to an RESP in the form of a refundable tax credit which will be claimed by the trust governing the RESP. In general, the rate will be equal to 10% of the first $2,000 annual contributions to an RESP for a child under 18.

However, for middle-income families, the assistance will equal to 15% of the first $500 of annual contributions to an RESP and for lower-income families it will equal 20%. The cumulative maximum credit for each child will be $3,600.

This new credit will apply to RESP contributions made after February 20, 2007.

Enhancements to the Tax Credit for Minor Children in Studies

Previously, the tax credit for minor children in vocational or post-secondary studies was reduced by 100% of their net income, including non-taxable components such as scholarships, fellowships and awards. Beginning in 2007, the credit will be reduced by only 80% of the net income of the child determined regardless of scholarships, fellowships and awards.

Replacement of the Tax Credit for Adult Children who are Students with a new Transfer Mechanism for the Recognised Parental Contribution

Starting in 2007, the tax credit for adult children who are students will be replaced by a new mechanism which will transfer to the parents the unutilised part of the student's basic credit for the year. The maximum amount will be $6,650.

The student will be able to transfer the amount to either his or her father or mother or divide it between them. The transferred amount will be deductible in the calculation of their tax otherwise payable the year.

Transfer of the Tax Credit for Tuition Fees

Beginning in 2007, students will be able to transfer the unused part of their tuition and examination fees to their parents or grandparents, the same way as they can federally.

The transfer may be made only in favour of one person whom the student will be required to identify on a prescribed form. If the fees exceed the maximum allowable transfer amount, the student will be able to carry forward the balance to future years.

Enhancement of the Refundable Tax Credit for Child Care Expenses

Effective for 2007, the amount claimed for child care expenses will no longer be limited by the earned income of the supporting person with the lowest net income, nor by the income of the person who assumes the maintenance costs of the child.

If two persons are eligible for the tax credit, they will be able to share it between them according to the existing rules.

New Refundable Tax Credit for Persons Giving Respite to Informal Caregivers

Effective for 2007, a new refundable tax credit of $500 is proposed for persons who provide voluntary respite to taxpayers who look after persons with a significant disability.

Enhancement of the Refundable Tax Credit for the Treatment of Infertility

The applicable rate for expenses related to a third and subsequent attempt at in vitro fertilization will be increased to 50% of allowable expenses. However the ceiling will remain at $20,000.

Enhancement of the Tax Credit for Retirement Income

The maximum amount of qualifying retirement income on which the credit is based will increase from $1,000 to $1,500. This will provide an actual credit of $300.

Adjustment to the SME Growth Stock Plan

Under the existing rules, taxpayers who sell securities in their Accro PME account must replace them within 21 days if they want to avoid an income inclusion or loss of their deduction.

Under proposed new rules, securities will have to be replaced by the later of the end of the second month following the month of withdrawal and December 31.

Increase in the Maximum Refund of QST Paid on a Hybrid Vehicle

The maximum refund of Quebec Sales Tax that may be claimed by the purchaser or long-term lessor of a new hybrid vehicle is increased from $1,000 to $2,000.

This measure takes effect for new hybrid vehicles bought or rented after February 20, 2007 and before January 1, 2009.

Saskatchewan Budget

The Saskatchewan budget was tabled on March 22, 2007. Apart from the introduction of a new personal amount for post-secondary graduates, discussed below, no changes to the personal tax system were announced. However, the 2007 tax thresholds and personal amounts will be increased by the provincial indexation factor of 2.2% as previously announced last November. The provincial tax rates for 2007 will therefore be:

11% of taxable income less than or equal to $38,405;
13% of taxable income greater than $38,405 and less than or equal to $109,729; and
15% of taxable income greater than $109,729.

Graduate Tax Exemption

Beginning with the 2007 taxation year there will be a new provincial personal amount, called a "Graduate Tax Exemption," equal to $10,000 of income for the first five years after graduation from a post-secondary institution. Like the Post-secondary Graduate Tax Credit (PSGTC), which it is replacing, it is designed to encourage students to stay in or move to Saskatchewan after they graduate.

In order to qualify for the five-year exemption, graduates must successfully complete an approved post-secondary program after 2006. Eligible programs must last at least six months and result in either:

A certificate, diploma, or degree; or
Provide certification to journeypersons.

A special grandfathering provision will allow a four-year exemption to individuals who graduated in 2006 and received the $850 PSGTC on their 2006 tax return.

If you cannot completely utilize your $10,000 exemption in any particular taxation year, you will be able to carry it forward for a maximum of five years, thus providing a 10-year period in which the full exemption may be claimed. You will not be able to transfer it to a spouse, common-law partner or other taxpayer.

In order to claim the credit, you will need a Graduate Tax Exemption Certificate. If you graduate in Saskatchewan, this will be issued to you by your educational institution. If you move to Saskatchewan from another province, you will have to apply to the government for a certificate.

Seniors' Drug Plan

Effective July 1, 2007, the Seniors' Drug Plan will provide for a maximum $15 prescription drug cost for all drugs under the formulary plan for people aged 65 and older.

Lower-income seniors who currently do not pay for prescription drugs will continue not to pay.

Yukon Budget

The Yukon budget was tabled on April 19, 2007. It contained no new tax measures.