Madam Speaker, it is an honour for me to rise today in the House for the first time as Parliamentary Secretary to the Minister of Finance and to participate in this debate.
It seems that my opposition colleagues prefer to fight the last war by focusing on a measure that the right hon. Prime Minister said yesterday we were not considering. Nevertheless, I must thank my colleague for this opportunity to outline the important tax measures the government has introduced to help middle-class Canadians.
The government recognized from the start that, even though economic growth has been weak in recent years, Canada has been able to meet those challenges from a position of strength. We are in an enviable financial position. Our debt-to-GDP ratio is well above the average for the G7. That means that we have the flexibility needed to implement our vision of ensuring that Canada's economy works for the middle class.
If the economy works for the middle class, it works for everyone. Measures that support the middle class are what the Canadian economy needs and what all Canadians deserve. Canadians asked for this type of measure and that is what we have given them and will continue to give them.
Since January 1, 2016, the government has been putting more money back in the pockets of nearly nine million Canadians every year. This measure was not just the right thing to do. It was also the smart thing to do for our economy. The tax cut for the middle class and its accompanying measures help make the tax system fairer so that all Canadians can succeed and prosper.
More specifically, the government has taken the following measures: it lowered the tax rate for Canadians in the second personal income tax bracket from 22% to 20.5%; introduced a 33% personal income tax rate on individual taxable income in excess of $200,000; returned the tax-free savings account, TFSA, maximum annual contribution to $5,500 from $10,000; and reinstated indexation of the TFSA annual contribution limit.
Let me very quickly expand on what these changes have achieved.
First and foremost are the personal income tax rate changes. Single individuals who benefited from the reduction of the second personal income tax rate will see an average tax reduction of approximately $330 every year and couples will see an average tax reduction of $540 every year.
Second, only Canada's top income earners are expected to pay more taxes as a result of the introduction of the new top personal income tax rate, that of 33%. As with other bracket thresholds, the top threshold is indexed to inflation. It rose to $202,800 in 2017.
Finally, the government returned the tax-free savings account, the TFSA, annual contribution limit to $5,500 from $10,000, effective January 1, 2016. Returning the TFSA annual contribution limit to $5,500 was consistent with the government's objective of making the tax system fair and helping those who needed it the most. When combined with other registered savings plans, a $5,500 TFSA annual contribution limit will allow most individuals to meet their ongoing needs in a tax-efficient manner.
Indexation of the TFSA annual contribution limit was reinstated so the annual limit would maintain its real value over time.
Another cornerstone of the government’s plan to strengthen the middle class was the Canada child benefit or CCB. The benefit will help parents to better meet the needs of their children. The CCB is simpler and more generous than the old child benefit system it replaced, and it is completely tax-free. In addition, it does a better job targeting the people who need it the most. I firmly believe that the many parents who receive this greatly-needed assistance appreciate it.
This year, the CCB will make it possible to lift hundreds of thousands of children out of poverty, more than in 2014. Since the CCB was implemented in July of 2016, nine out of ten families have received more money than they did under the former child benefit system, or an average of nearly $2,300 per year for the 2016-17 benefits. Parents with children under 18 will receive a maximum annual benefit of $6,400 per child under age 6 and $5,400 per child under 18.
Whether these additional funds are used for things like buying school supplies, covering part of the family grocery bill, or buying warm coats for winter, the CCB helps parents cover the high cost of raising their children.
The Canada child benefit will be indexed to inflation starting in 2020 so that families can continue to count on this additional support for a long time, with their benefits keeping pace with rising expenses.
The Government of Canada also reached a historic agreement with provincial governments to enhance the Canada pension plan, also known as CPP. This plays another key part in providing support to middle-class families. The government undertook this after the Department of Finance examined whether families nearing retirement were adequately prepared for that retirement. Finance officials found that of about one in four Canadian families approaching retirement, 1.1 million families were at risk of not saving enough to maintain their current standard of living and the risk was highest for middle-class income earners. Families without workplace pension plans are at an even greater risk of under-saving for retirement. In fact, a third of these families are at risk.
The government is aware of the need to help Canadians save more. Saving more will mean they are more confident about their futures and about their ability for a secure and dignified retirement.
There was a particular concern regarding young Canadians who tended to have higher debt than the previous generation and, in most cases, would live longer than the previous generations. They face the challenge of securing adequate retirement saving at a time when fewer can expect to work in jobs that will include a workplace pension plan. This is why the government acted to strengthen the Canada pension plan.
Strengthening the middle class and creating conditions for long-term economic growth are the government's top priorities. Tax fairness is an important part of these commitments and adjusting the tax system to ensure it is functioning as intended and contributing to an economy that works for everyone.
The basic Canadian value of fairness is also why, as a part of our international effort to combat tax evasion, budget 2016 confirmed that the government's intention to implement what was known as the common reporting standard.
The introduction of the common reporting standard for the exchange of information between national revenue agencies on financial accounts held by non-residents is an important global development. This multilateral initiative will help enhance tax compliance and reduce opportunities for tax evasion by those who seek to find ways to avoid paying their fair share of taxes.
Under the legislation passed by Parliament last December, Canada is implementing the standard consistent with our commitment to the G20, and similar commitments, by more than 100 other jurisdictions.
Under the new standard, the Canada Revenue Agency will collect information from financial institutions on accounts in Canada held by non-residents. Tax administrations in foreign jurisdictions will likewise collect information from the financial institutions about accounts held by residents of other countries including Canada.
The CRA will formalize exchange agreements with foreign jurisdictions, having verified that each jurisdiction has appropriate capacity and safeguards in place to ensure the confidentiality of its information. The financial account information will be exchanged on a reciprocal bilateral basis.
The budget also announced plans to implement a new requirement for country-by-country reporting. This is an initiative agreed to under a G20 OECD project that aims to address tax avoidance by multinational enterprises through base erosion and profit shifting. Under the new rules, large multinational enterprises will be required to file with tax authorities information providing high level profiles of their activities in each jurisdiction in which they operate. These reports will enhance transparency and assist tax administration in performing effective risk assessments.
Going forward, Canada will continue to work with the international community to ensure a coherent and consistent response to tax avoidance by multinational enterprises.
In addition, budget 2016 also included resources for CRA to address tax evasion and aggressive tax avoidance. This would enable CRA to enhance its assessment capabilities through the hiring of additional auditors and specialists in order to have the resources needed to ensure all taxpayers pay their fair share of taxes.
Finally, our government is committed to ensuring that tax expenditures are fair for all Canadians, efficient, and fiscally responsible.
In budget 2016, the government committed to undertake a comprehensive review of the federal tax expenditures, recognizing that concerns had been expressed regarding the efficiency, fairness, and complexity of the tax system. This work is ongoing and at its heart is the goal of ensuring we invest to grow the middle class and strengthen our economy. We do so in ways that preserve our enviable fiscal position for future generations.
Once again, one of the first measures we took as a government was to lower taxes for the middle class, something that nearly 9 million Canadians benefited from.
We also introduced the Canada child benefit, which provides additional financial assistance to nine out ten families compared to the Conservatives’ intention of sending cheques to millionaires. We have also taken a series of measures to guarantee tax fairness, which is the responsible thing to do.
These measures are in response to our commitment to help the middle class and those working hard to join it. We will continue to work for these Canadians in order to build a stronger and more equitable economy where all families can grow and prosper.
However, as our Prime Minister indicated very clearly yesterday, this will not include a new tax on health and dental benefits.