1992 Canadian federal budget

The 1992 Canadian budget was a Canadian federal budget for the Government of Canada presented by Minister of Finance Don Mazankowski in the House of Commons of Canada on 25 February 1992. It was the fourth budget after the 1988 Canadian federal election. It is the first budget presented by Don Mazankowski.

1992 (1992) Budget of the Canadian Federal Government
Presented25 February 1992
Parliament34th
PartyProgressive Conservative
Finance ministerDon Mazankowski
Total revenue124.486 billion [1]
Total expenditures163.505 billion [1]
Deficit$39.019 billion[1]
‹ 1991
1993 ›

Background

The budget is presented amid poor economic conditions and soaring federal deficit.

Taxes

The 1992 budget introduced significant changes to both personal and corporate income tax systems.

Personal income taxes
  • Reduction in the personal surtax rate: the general personal surtax rate is lowered by 1 percentage point (to 4%) on 1 July 1992 and another (to 3%) on 1 January 1993.[note 1][2][3]
  • Introduction of the Home buyers' plan (HBP): the budget created the HBP to allow individuals to withdraw up to $20,000 from their RRSPs to finance the purchase of a principal residence, repayable over 15 years.[note 2][4][5]
  • Creation of the Child Tax Benefit (CTB): starting January 1993 the CTB replaced family allowances, the child credit and the refundable child credit. The initial CTB amount is set at $1,020 with a Working Income Supplement of up to $500 for low-income working families.[6]
  • Increase of the child care expense deduction: the maximum deduction is increased by $1,000 ;[note 3][6][7]
  • The increase in the RRSP and RPP limits is delayed by a year.[8][9]
  • Improvements to the National Labour-sponsored venture capital corporation Tax Credit: the maximum yearly credit amount, set at $700 since 1985, is increased to $1,000 starting in fiscal year 1992.[10] Investments rules for the program are also relaxed.[11]

Corporate income taxes

The budget reduces taxes imposed on corporations by $2 billions over the 1992-1993 to 1996-1997 period. The budget specifically provides relief to the manufacturing and processing industries that have been seriously affected by the recession.[12]

  • Reduction in the manufacturing and processing tax rate: phased-in two steps, 22% on 1 January 1993 (down from 23%) and 21% on 1 January 1994 ;[note 4][13][14]
  • Faster depreciation for selected equipment: the CCA deduction rate for eligible manufacturing and processing machinery and equipment is increased from 25 to 30%.[13]

Other taxes
  • The withholding tax on direct dividends is reduced to 5% from 25%.[13][12]

Expenditures

Expenditure Control Plan

The Expenditure Control Plan announced in the 1990 budget and extended in 1991 is continued and broadened in the 1992 budget.[15]

Cuts
  • The Prime Minister[16] and all cabinet ministers[17] took a 5% pay cut on 1 April 1992 ;
  • Departments' budget were further cut by 3% between 1992-1993 and 1996-1997 and spending reductions of $170 millions in 1992-1993 alone were imposed ;
  • Federal departments' communication budgets were cut by $75 millions ;
  • Defence spending was cut by $2.2 billions over the 1992-1993 to 1996-1997 years ;
  • 24 federal agencies are abolished or merged ;
  • 13 ministerial advising bodies are abolished or merged.

Spending limitations
  • New travel guidelines were introduced to reduce costs ;
  • Growth in spending on social housing by the CMHC was capped at 3% yearly until 1996-97.

Reactions

The budget garnered mixed reaction from columnist Jean-Paul Gagné from Les Affaires who pointed out that the budget was unextraordinary but contained some interesting measures (reduction in the income surtax, no increase in the GST rate, Home Buyers' Plan).[18]

Opposition

The Liberal leader of the Official Opposition in Ottawa Jean Chrétien, and the NDP leader Audrey McLaughlin, criticized the budget for its lack of measures to fight unemployment. The Bloc Québécois leader Lucien Bouchard pointed out the budget was a proof that the federal government was at the end of its rope.[19]

Business community and labour unions

The budget was well received by the business community and especially real-estate and construction actors.[20] The value of the Canadian dollar increased by 0.39 cents with respect to the United States dollar in the foreign exchange market the day after the budget speech. The TSX 300 index gained 35.52 points while the Montreal Stock Exchange index gained 19.39 points.[21]

Quebec's labour unions (CSN, CEQ and FTQ) were disappointed by the budget pointing out the lack of measures to fight unemployment and poverty and the lack of new infrastructure projects. The unions also criticized the abolition of the Economic Council of Canada.[20]

Provinces

Quebec's finance minister, Gérard D. Levesque, received the budget favourably talking about a step in the right direction in that it did not reduce transfers to provinces.[22]

The PQ, the Official Opposition in Quebec, on the other hand decried the budget as cosmetic and not going far enough to fight unemployment although some tax relief measures (and especially the reduction in the personal surtax) were applauded.[22]

Ontario's NDP Finance minister Floyd Laughren also criticized the lack of measures to fight unemployment.[19]

Legislative history

The Child Tax Benefit was scheduled to enter into force on 1 January 1993[23] and was included in a separate bill which received royal assent on 15 October 1992.[24] Dissolution of some abolished crown corporation and other public bodies was included in bill C-63 which received royal assent on 15 February 1993.[25]

Some minor changes announced in the budget (notably amendments to the Canada Student Loans Act and pay cuts for the Prime Minister and federal ministers) were included in the Budget Implementation (fiscal measures) Act, 1992 which received royal assent more than a year after the budget speech, on 2 April 1993.[26]

Most significant tax measures of the budget were included in bill C-24 which received royal assent on 10 June 1993.[27]

Notes and references

Notes
  1. Effective surtax rate is 4.5% for fiscal year 1992.
  2. The measure was initially limited to proceeds received before 2 March 1993 for housing bought before 1 October 1993 ; subsequent budgets will expand the measure indefinitely which rendered both deadlines ineffective.
  3. Maximum deduction reaches $5,000 per child under 7 (or eligible to the Disability Tax Credit) and $3,000 in any other case.
  4. Achieved through a phased-in increase to the manufacturing and processing profit deduction listed in s 125.1 of the Income Tax Act.

References
  1. "Canada's deficits and surpluses, 1963-2014". CBC News. CBC/Radio-Canada. Retrieved 25 April 2015.
  2. Budget Papers, p. 69.
  3. S.C. 1993, c 24, s 103.
  4. Budget Papers, p. 69, 142-143.
  5. S.C. 1993, c 24, s 83.
  6. Budget Papers, p. 136.
  7. S.C. 1993, c 24, s 23.
  8. Budget Papers, p. 94.
  9. S.C. 1993, c 24, s 85(1).
  10. Income Tax Budget Amendments Act, 1996, S.C. 1997, c. 25, s. 37(7)
  11. Budget Papers, p. 158.
  12. Jannard, Maurice (26 February 1992). "La fiscalité des entreprises est réduite de deux milliards" (in French). Montréal: La Presse. pp. A4.
  13. Budget Papers, p. 68.
  14. S.C. 1993, c 24, s 64.
  15. Budget Papers, p. 70-71.
  16. Budget Implementation (fiscal measures) Act, 1992, s 14(1).
  17. Budget Implementation (fiscal measures) Act, 1992, ss 14(2), 15.
  18. Gagné, Jean-Paul (7 March 1992). "Le premier budget de Maz le magicien" (in French). p. 6.
  19. "Rien pour contrer le chômage: la récession va durer longtemps, disent les chefs de parti". La Presse. The Canadian Press. 26 February 1992. p. B1.
  20. Gilbert, Mario; Dansereau, Suzanne. "Le milieu des affaires est satisfait du budget, les syndicats ne le sont pas" (in French). Montréal: La Presse. pp. B1. Retrieved 19 June 2020.
  21. Beauregard, Valérie (27 February 1992). "Le budget dope le dollar" (in French). Montréal: La Presse. p. D1. Retrieved 19 June 2020.
  22. Lessard, Denis (26 February 1992). "Québec accueille favorablement le budget, le PQ le juge « cosmétique »" (in French). Montréal: La Presse. p. A3. Retrieved 19 June 2020.
  23. S.C. 1992, c 48, s 12(2).
  24. S.C. 1992, c 48.
  25. S.C. 1993, c 1.
  26. Budget Implementation (fiscal measures) Act, 1992.
  27. S.C. 1993, c 24.

Budget documents
  • Budget Papers 1992 (PDF). Ottawa. 25 February 1992. Retrieved 12 September 2021.{{cite book}}: CS1 maint: location missing publisher (link)

Enacted legislations
This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.