Globe and Mail Update
Ottawa Tax-cut time in Canada is over.
After introducing the biggest personal income tax cut in Canadian history last year, the federal government largely ignored taxes in its latest budget.
Even the arcane tax changes included in every budget were small this time around. Examples: A temporary tax deferment for small companies, and tax breaks for apprentice auto mechanics and people upgrading their education.
It's important to note here that there is a trickle of tax relief left for the year ahead from the de-indexation of the tax system that was announced in 2000.
De-indexation means the various tax brackets rise along with inflation each year. An example of this in practical terms is that you'll be able to earn $7,634 before having to pay federal income taxes in 2002, versus $7,412 in 2001. You'll also be able to earn somewhat more before graduating to a higher tax bracket thanks to de-indexation.
Even so, paycheques will generally be lower come Jan. 1 as people resume paying Employment Insurance and Canada Pension Plan premiums. Incidentally, CPP premiums are on the rise again in 2002, and the increase will more than offset a tiny drop in EI premiums.
One of the few notable tax measures announced in the budget applies to small corporations that are struggling as a result of the economic slowdown. They'll be able to defer federal tax installments due in the first three months of next year for at least six months without incurring any interest or penalties.
Another measure applies to people who are receiving government financial assistance to further their post-secondary education and thus cannot take advantage of the Education Tax Credit. Starting in 2002, the tax credit will be available to these people.
There's also some assistance for adults who go back to high school or who take training courses that aren't eligible for a tuition tax credit.
Current rules require these people to count any tuition-related government financial assistance they receive as income on their tax returns. The proposed new rule would give them a corresponding tax deduction, thereby lightening their tax load somewhat.
Other groups to be favoured by tax measures in the budget include apprentice mechanics and construction workers.
Mechanics will receive a larger tax deduction for the expensive tools they must buy, while construction workers employed in remote locations will receive a more generous tax treatment of meal expenses.