1994 Canadian federal budget
The Canadian federal budget for fiscal year 1994–95 was presented by Minister of Finance Paul Martin in the House of Commons of Canada on 22 February 1994. It was the first federal budget under the premiership of Jean Chrétien.
Background
The budget was tabled only a few months after the 1993 Canadian federal election in which the Liberal Party led by Jean Chrétien received a large majority of the seats in the House of Commons. Paul Martin, Chrétien's main rival in the 1990 Liberal Party leadership election was appointed Minister of Finance.February 8 Prime Ministerial Statement
On 8 February 1994, the prime minister Jean Chrétien delivered a surprise prime ministerial statement in the House of Commons to announce a federal action plan on tobacco smuggling:Excise taxes on tobacco were dramatically reduced, with additional reductions in provinces that agreed to reduce their provincial excise taxes. Additional excise taxes were to be imposed on exported tobacco products, along with a surtax on tobacco manufacturing profits.
Taxes
Personal income taxes
The budget reduced or repealed several tax incentives:- The $100,000 lifetime capital gains exemption was repealed;
- The first $25,000 of employer-provided life insurance was to be considered a taxable benefit;
- The age tax credit was reduced;
- Only 50% of meals and entertainment expenses could be deducted.
Corporate income taxes
The budget also reduced several tax incentives:- Investment Tax Credits rates were reduced;
- * The Special Investment Tax Credit and the regional component in respect of R&D were eliminated;
- R&D expenses and the small business deduction calculations were tightened for private corporations;
- New rules were implemented to limit tax avoidance during divisive corporate reorganizations.
GST and other taxes
Along with the reduction in the deductibility of meals and entertainment expenses, the proportion of GST that could be claimed on these expenses as an input tax credit was also reduced to 50%.Expenditures
Transfers to provinces
The budget announced the freezing of Canada Assistance Plan payments to their 1994-95 levels after March 31, 1995. Unlike the 1990 restrictions, all provinces were affected by the cap.The Reform Party supported reductions to the CAP while criticizing that the cutbacks were not matched by amendments to health national standards to give more freedom to provinces in adjusting the services they provide.