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moneysense.ca, 25/02/08
What to Expect in the Budget?
Finance Minister Jim Flaherty will rise in the House of Commons to present the minority government’s third budget tomorrow. Mr. Flahrety has set low expectations for the budget, claiming repeatedly that the “cupboard is bare” and not to expect significant tax cuts or spending measures in the budget.
There is some speculation that the budget would try to fulfill a vague plan proposed by the Tories in their previous election platform:
Eliminate the capital gains tax for individuals on the sale of assets when the proceeds are reinvested within six months. Canadians who invest, or inherit cottages or family heirlooms, should be able to sell those assets and plough their profits back into the economy without taking a tax hit. It is time government rewarded Canadians who reinvest their money and create jobs.
A report in The Globe and Mail speculates that the government “can’t let a third budget go by without offering something for investors, especially with a possible election looming this year”. I guess we’ll find out tomorrow but it would certainly be a nice surprise, if we see some action on the capital gains front.
moneysense.ca, 25/02/08
I think they should bring back a lifetime personal exemption amount – this would be better than the reinvest within 6 months idea since that would be an administrative nightmare.
Mike
There better be SOMETHING for investors. However, I have a nagging feeling that there will be very little in terms of tax cuts as they can use the excuse of smaller surpluses.
They should nix the 45% dividend gross up amount. I think that will resonate well among the income trust refugees.
Plus, that would make me a happy man too.
I wonder if ‘family heirlooms’ mean billion dollar family fortunes.
I think they have put themselves in a very tight spot here. The $12 billion that they have spent in GST cuts have squeezed them to the point where it will be difficult to do anything for investors. Plus those GST cuts aren’t really showing up in a lot of everyday purchases. Anyone see that Marketplace episode a couple of weeks ago about that? There are a lot of companies out there that have ‘adjusted’ their prices so the pre and post GST cut price to consumers is the same, they just get to increase their after-tax revenue by 1% or 2%. It doesn’t work out to a whole lot for a bunch of items (like a $2.00 newspaper or even a $9.50 movie ticket), it is just that consumers are still paying the same amount, the government just isn’t collecting it anymore. And maybe today they will cry poor and not come up with anything for investors (which I think would be a very dangerous move for them).
My bet is on the Tax Prepaid Registered Savings account. No tax break on money that is put in but no tax on withdrawals either. The nice thing about the plan is that there is no revenue hit right now. They’ll put a maximum, say $5,000 that can put in the account every year. Politically, it will be an easier sell than something specific for capital gains, which critics will call a tax break for the rich (with some justification because only a small percentage of households have any significant capital gains to declare).
CC, that would be an interesting account as one could trade options, or day trade within the account without any taxation.
FT: I doubt it. They may have a list of qualified investments just like RRSPs. IIRC, you are only allowed to write covered calls in a RRSP. What are you doing trading in your savings account anyways?
I have traded calls and puts in my RRSP account that were not covered.
nobleea: You’re right. Here’s the relevant section from E*Trade’s FAQ:
Link
Sorry for the error. I’ve personally never traded options.
Well CC, you nailed it… http://www.cbc.ca/news/background/budget2008/#s1
Tax free account that can be contributed up to $5,000 per year.
nice call CC…and at Feb 26, 2008 at 10:51 am no less – impressive
I just got lucky. I always thought the Tax Free Account was a really good idea and wondered why the conservatives didn’t reprise the idea for their last election platform. I’m glad they brought it back instead of some half-baked idea on capital gains exemption.