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Market Commentary – Q1 2017

US Election Market CommentaryIt’s the end of the first quarter and the Liberals have published their second Federal Budget since their election win in 2015.

 

This year’s budget promotes the idea of making the tax system fairer for the middle class by closing tax loopholes, cracking down on tax evasion, improving existing measures for individuals and families, and eliminating measures that are no longer efficient or effective.

 

Though the proposed changes were relatively minor, bigger changes may still be on the horizon.

 

Here are some of the highlights:


Balanced Budget

  • Published numbers show that the deficit projection for the current year is $23 billion, anticipated to rise to $28.5 billion in 2017/2018, then back down to $19 billion by 2021. That being said, the budget is admittedly correlated with the economic growth that is projected within the country. 
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  • When asked about the time-table for fulfilling the 2015 Liberal platform “Balancing the Budget”, Finance Minister, Bill Morneau said: Our plan is to continue to be responsible every step along the way. That’s what you’re seeing here. You’re seeing that we’ll be able to show a decline in the net debt to GDP, which is what we focused on as a fiscal anchor and will continue to take that approach moving forward.

Maternity & Parental Leave

  • The maternity leave prior to the due date has been extended from eight weeks to twelve weeks. 
  • In addition, after the birth of the child, parental leave has been altered from twelve months to eighteen months. New parents choosing the 18 month option will receive a reduced benefit of 33% of average weekly earnings, compared to 55% of average weekly earnings with the 12 month option.   

Employment Insurance

  • A change that will affect all working Canadians is an increase to EI premiums. 
  • Premiums will rise by five cents, to $1.68, per $100 of insurable earnings, which is the maximum allowable for an increase as per the Employment Insurance Act. 

Tax Changes to Certain Goods and Services

  • Certain tax increases will be seen on consumer goods such as alcohol, tobacco, and even Uber rides. 
  • On April 1st the excise taxes will see a rise of 2.5% for alcohol and 2% for tobacco.
  • Uber, although not uniformly legalized throughout the entire country, will see a tax that is equal to that subjected to taxi fare. Starting July 1, all Uber drivers in Canada will be required to register for GST/HST and subsequently charge these taxes to their customers, possibly eroding some of the benefits on the consumer side.

Capital Gains

  • One of the most significant decisions, in the eyes of many investors and businesspeople, is the Liberal’s choice to leave the capital gains inclusion rate status-quo. 
  • Capital gains will continue to be calculated with an inclusion rate of 50% amidst the chatter that this number could rise up to 75%.  Though this change may happen eventually, owners of applicable assets can breathe a sigh of relief for at least another year.

Other Proposals

  • Discontinue sales of new Canada Savings Bonds in 2017 due to their declining popularity.
  • Elimination of the Public Transit Tax Credit as of July 1, 2017.
  • First-Time Donor’s Super Credit for charitable donations will be discontinued, as previously planned.
  • Tuition tax credit extended to occupational skills courses offered by a university, college, or other post-secondary institution that are not at the postsecondary level.

Overall, the 2017 Federal Budget proposal avoided any major initiatives and instead continued last year’s plan to increase spending, create jobs, and strengthen the middle class.


All the best,


Sabrina Beaudoin, B.Sc, CFP                               Tore Corrado, B.A


P.S. Stay tuned for the latest installment of Steven Bicego’s blog series: “Get the future you want: Make a financial plan” on our website next week at www.ciccone-mckay.com/blog.html

 

 

 

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About Ciccone/Mckay

Ciccone/McKay Financial Group is an independent financial services firm with over 75 years of combined experience in the areas of risk management, wealth management and employee benefits.

 

We specialize in providing insurance and investment solutions for our clients, helping businesses, individuals and families grow, manage, protect and transfer their wealth.


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