Madam Speaker, I would like to congratulate my colleague on her excellent speech.
I am pleased to participate in this debate on the middle-class tax cut that we announced in December. It is an important Government of Canada measure for Canadians.
I want to do two things today. First, I would like to give a brief overview of our economic and fiscal situation. Then, I will explain why the middle-class tax cut will help grow our economy.
There is no doubt that, as we begin to put our plan for economic growth and long-term prosperity into action, we are up against fierce headwinds. As we all know, we are still dealing with very difficult economic conditions.
In its January economic outlook, the International Monetary Fund, the IMF, projects that global growth will pick up modestly to 3.4% in 2016 and 3.6% in 2017. The IMF's October 2015 outlook for 2016 and 2017 was 0.2 percentage points higher. We all know that is not good news.
Although American economic performance is encouraging, and we are all thrilled about it, the European and Chinese economies remain a serious cause for concern. Global crude oil prices remain at less than half of what they were in mid-2014, mainly due to persistent oversupply and softening demand.
Clearly, what happens outside our borders has real and very serious consequences here at home. In Canada, our economic performance in the first half of 2015 was weak, and that was largely due to the collapse of oil prices in 2014. I will leave it to my colleagues to judge for themselves. Last April the federal government forecast that the price of oil would be approximately $71 U.S. a barrel by the end of the year. Right now, oil is trading at about $30 a barrel, which is a huge difference. We now know that growth will be weaker than what was forecast in the last budget projections.
The economic situation is therefore much more difficult than the previous government predicted. This will of course have important implications for our currency and our fiscal situation.
However, there is also some good news. The gross domestic product, or real GDP, growth resumed in the third quarter of 2015. In its economic outlook released on January 19, the IMF projects that growth in Canada will pick up over the next two years in relation to 2015. We are also in an enviable position because of our low debt-to-GDP ratio, not to mention our wealth of natural resources, or the fact that we have an extraordinarily skilled workforce, compared to what we see around the world.
A focal point of our economic agenda is to put the debt-to-GDP ratio on a downward track. In the end, we also want to return to a balanced budget, which is extremely important to us. To achieve these goals, our policies will strike a balance between fiscal responsibility and controlled investments that promote economic growth.
One of the most important elements is to restore economic growth to the middle class, which is the backbone and the heart of our economy. That is why one of the first items on the government's agenda was to table a notice of ways and means motion to cut taxes for the middle class. This is the right thing to do and it is what we are doing.
The tax cut for the middle class and the accompanying proposals will make the tax system fairer and help Canadians succeed and prosper. Let us look more closely at what we are proposing. Specifically, the bill introduces the following measures: first, we will reduce the second personal income tax rate from 22% to 20.5%. Then, we will introduce a 33% personal income tax rate on individual taxable income exceeding $200,000 a year. Lastly, we will also lower the contribution limit for the tax-free savings account, the famous TFSA, from $10,000 to $5,500 and reinstate indexation of the annual contribution limit.
I would quickly like to explain these three points.
First, I will talk about the changes to personal income tax rates. The changes came into effect on January 1, and this measure is expected to benefit approximately nine million Canadians in 2016. For example, single individuals will see an average tax reduction of $330 a year. Couples can expect an average tax reduction of $540 a year.
Second, as I mentioned, the government adopted a new personal income tax rate of 33% that will apply to people who earn over $200,000 a year. That means that only those with the highest incomes will have to pay more taxes. Period. Like the other tax bracket thresholds, the $200,000 threshold will be indexed to inflation.
Third, the government dropped the TFSA annual contribution limit from $10,000 back down to $5,500 as of January 1, 2016.
However, to reassure those who are wondering, this change is not retroactive. The TFSA contribution limit for 2015 will remain at $10,000.
Restoring the annual contribution limit to $5,500 is consistent with the government's objective to make the tax system fairer and help those who need it most.
Combined with other registered savings plans, a TFSA with an annual contribution limit of $5,500 will enable most individuals to meet their ongoing savings needs in a tax-efficient manner.
The indexation of the TFSA annual contribution limit will be reinstated so that the annual limit maintains its real value over time.
Before closing, I want to highlight some other measures included in today's bill, because I think they are very important.
Today's bill proposes to change the current flat top-rate taxation rules applicable to trusts to use the new rate of 33%.
The bill would amend the charitable donation tax credit to allow higher income donors to claim a 33% tax credit on the portion of donations made from income that is subject to the new 33% marginal tax rate.
I could go on, but it is clear that the Government of Canada is committed to helping the middle class in a practical way, through this bill and other bills that will strengthen our economy, create jobs, and ensure that Canada has a better future.