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Your tax bill could change in 2019. Here’s what to expect.

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A whole host of federal tax changes come into effect in the new year. Some will hit your paycheque, others your bills — and if you’re a small business owner, there are a couple of changes coming for which you’ve likely been preparing for months.

Starting in January, Canadians’ Canada Pension Plan contributions increase from 4.95 per cent to 5.1 per cent on earnings between $3,500 and $57,400. It’s the first of five years of graduated increases running until 2023, when the rate will reach 5.95 per cent.

The increases are going to pay for what eventually will be an enhanced CPP. The Quebec Pension Plan will see similar changes.

“You can think of it as a cost right now, but you’re actually going to be contributing toward an enhanced Canada Pension Plan benefit over time, ultimately leading to a higher amount of pensionable earnings,” said Jamie Golombek, managing director of tax and estate planning with CIBC.

“So you’re actually going to get something in return for that extra contribution.”

Partially offsetting that increased CPP contribution on your paycheque will be a drop in Employment Insurance premiums, from $1.66 to $1.62 per $100 of insurable earnings.

2019 also will be the first tax year when low income workers can qualify for a more generous Canada Workers Benefit, a program intended to help the working poor stay employed.

The maximum benefit will increase by between $300 and $400, based on whether the applicant is single or part of a family. That brings the maximum benefits to $1,355 for a single person or $2,335 for a single parent or couple, depending on personal incomes.

However, as 2019 is the eligibility year, low income workers will have to wait until 2020 to get the boosted benefit.

Experts say more than half of Canadians who live in poverty are working.

“Gone is this idea, I hope … that people live in poverty because they just need to find a job, they need to pull up their boot straps and get off their couch,” said Michele Bliss of the non-profit advocacy group Canada Without Poverty. “That idea is so antiquated.”

Small business tax changes

One of the big news stories of the past year and half has been the changes the federal government is making to small business taxes. The most controversial change affects the rules on how much passive income an incorporated small business can hold.

Passive income is money earned in interest on funds that sit idle within an incorporated business, without being reinvested or used to cover operating expenses. As of January 1, business owners can hold up to $50,000 in passive income before they start to lose access to the advantageous small business tax rate.

Small businesses pay a relatively low tax rate — currently 10 per cent — on the first $500,000 of business earnings. But staring in January, if those businesses hold in excess of the new limit on passive income, some of that first half-million in earnings will be subjected to the much higher corporate rate, depending on how far over the new limit they are.

The federal government’s goal is to encourage business owners to reinvest their passive earnings into their businesses, or into hiring more people, rather than sitting on the cash.

“I think a lot of small businesses are still unaware that some of the changes are coming,” said Dan Kelly, president of the Canadian Federation of Independent Business.

“In fact, that’s one of my biggest worries. I think a lot of firms are sitting ducks for the Canada Revenue Agency.”

However, the small business tax rate is going down from 10 to 9 per cent in 2019 — a move long promised by the Liberal government, one that many saw as an attempt to placate a small business community angered by the passive income changes.

“But the passive investment increases are going to eclipse any reduction in taxes that a small business might feel,” said Kelly.

Still, the federal government estimates the average small business — one that has eligible business income of $107,000 — will keep an extra $1,600 per year after the cut.

And for some really small businesses — especially those not incorporated and with no passive income to worry about — that tax cut will be very welcome.

“2018 was actually one of the toughest years we’ve had. We sell a niche product that’s been copied and is now sold in box stores. So we’re competing with a lot of big businesses here,” said Katrina Barclay of Malenka Originals in Ottawa. Her store refurbishes outdated furniture with a special chalk paint.

“At the end of the day, at the end of the month, if there’s a little bit of extra money left over that we can reinvest into the business, then it definitely helps.”

Higher prices at the pump

Possibly the most politically charged tax change coming in 2019 is Ottawa’s new carbon pricing system. In jurisdictions that don’t have carbon pricing mechanisms of their own, Ottawa will levy a tax on fossil fuels of $20 per tonne of greenhouse gas emissions starting in the new year, rising by $10 each year to $50 a tonne by 2022.

Emissions over set limits from large, industrial emitters in provinces without carbon pricing systems will fall under the federal governments carbon pricing rules starting in January. For consumers, the cost of fossil fuels and the services they support will start going up in April.

The government estimates that, once the carbon tax is in place in the provinces where it will be imposed, the cost of a litre of gasoline will go up 4.42 cents, natural gas will go up 3.91 cents per cubic metre and propane will go up 3.10 cents a litre.

People in those provinces will get direct rebates to offset the increased costs. The amount will vary based on the province and the number of people in the household. In Ontario, for example, the rebate for the average household (defined as 2.6 people) would be about $300 a year, or about $248 in New Brunswick, or $336 in Manitoba, or $598 in Saskatchewan.

“I think the government has designed this system in a way that will prevent us from getting a big ding from the carbon pricing system,” said Nick Rivers, Canada Research Chair in Climate and Energy Policy at the University of Ottawa.

In Yukon and Nunavut, consumers will see the cost of fossil fuels rise due to carbon pricing — but because the territories themselves are adopting the federal system, the revenue will go to the territorial governments, not to individual households.

Other tax and price changes coming:

Postage stamp prices are set to increase.

Many personal income tax credit and benefit amounts are being indexed to inflation:

  • The basic personal amount rises to $12,069
  • The annual contribution limit to tax-free savings accounts will increase to $6,000 from $5,500

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Dreessen: Ottawa has to shed its image as a town that doesn’t like fun

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Ottawa has long held a reputation as a place that fun forgot. People who live here know that there is a lot to love about the city: its history, the Rideau Canal, proximity to parks and rivers, excellent clubs, museums and galleries all make Ottawa a great place.

More spontaneous fun things are harder to come by. We’ve created a process that makes it hard for small businesses to thrive and where the process is more important than the outcome.

In 2016, a local artist planned to give away free T-shirts celebrating Ottawa 2017 on Sparks Street, until the local Business Improvement Association (BIA) asked him to move, squashing a fun event to bring people together.

In 2017, business proposals to the NCC executive committee made a business case to open cafés at Remic Rapids, Confederation Park and Patterson Creek. In the summer of 2020, two opened; the Patterson Creek location, opposed by neighbours, has yet to see the light of day, though the NCC website indicates it may happen in 2021.

In each case, the cafés are only open for a few brief summer months. Despite the fact that Ottawa celebrates itself as a winter city, we can’t, somehow, imagine how people might want to enjoy a café in the spring or fall, or during winter months while skiing along the river or skating along the canal. Keeping public washrooms open, serving takeout and, yes, using patio heaters, could make these cafés fun additions to our city for most of the year.

More recently, Jerk on Wheels, a food truck with excellent Caribbean chicken and two locations, has run intro trouble. The one on Merivale Road continues, but the Bank Street location in Old Ottawa South has to close. According to social media posts from the owners, despite the business having all permissions in place, local restaurant franchises of Dairy Queen and Tim Hortons have objected to its presence.

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Ottawa businesses frustrated with slower pace of Ontario’s Roadmap to Reopen plan compared to other provinces

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OTTAWA — As Canada plots its roadmap to reopening, each province is choosing their own path to reopen the economy and lift the COVID-19 restrictions.

Some are moving towards loosened restrictions at a faster pace than Ontario, which is frustrating for business owners who say they are ready to receive customers safely.

Patio season is upon the city, and at Banditos Restaurant on Bank Street, owner Matt Loudon is staging the large outdoor dining area to prepare for the summer rush. But the patio will have to remain closed until at least June 14, when it is expected Ontario will move into Step One of the three-step Roadmap to Reopen plan

“I hope they push it up a little bit,” says Loudon. “It’s beyond frustrating all the other provinces are opening up before us, we’ve been locked down longer than anybody else.”

Loudon, who owns two restaurants, says their outdoor seating has always been safe and that they have invested in added measures like sanitization stations and personal protective equipment for the staff. Indoor dining will continue to remain off limits in Ontario until Step Three. When patios do open, tables will be limited to four people. 

Unlike British Columbia’s four-pronged approach that began May 25. Residents in the province are now allowed to dine both inside and out, with a maximum of six per table, not restricted to one household.

Quebec will enter into its first step Friday, where outdoor dining will be available for two adults and their children, who can be from separate addresses per table. This applies to red and orange zones in the province. The curfew will also be lifted. 

In Gatineau, hair salons opened their doors to customers last week. Ten minutes away at Salon Bliss in Ottawa, all owner Sarah Cross can do is hope she can reopen sometime in July.

“Most people think that government funding covers all the bills but it’s far from it,” says Cross. Her upscale salon has nine chairs and over the course of the pandemic, in order to comply with regulations and keep staff and patrons, safe, only three chairs can now be filled. She says the hardest part is that the rules constantly change and vary in each region, adding it doesn’t make sense how one is better than the other.

“Our livelihood is dependent on what the decisions are made and if they were aligned with one belief system then I think they would have the trust of the public to follow these protocols.”

Many Ontario business owners say it’s not only a matter of necessity they open, but can do so safely. Infectious disease physician Dr. Sumon Chakrabarti agrees, and says the province needs to expedite its timeline.

“Especially with the fact that we are in the post vaccine era,” says Chakrabarti.

“It’s important for us to remember that we have been following this case count very closely for the last year and certainly we’ve had some experiences with opening things, especially with the second and third waves we have to remember that as we go forward now vaccines are a huge difference maker to the situation. Cases may go up but that doesn’t mean the most important thing will go up which is hospitalizations.”

Chakrabarti says while people will still get infected with COVID-19, with the reduced risk of hospitalization in large numbers there is no reason to restrict the community. He says while it’s not time for packed stadiums, it’s also not time for lockdowns and Ontario should re-think its strategy.

“We have to faith in the vaccines. We have seen in the other parts of the world like Israel, the U.K.,and the U.S. our neighbours to the south,” says Chakrabarti. “They are very safe and effective and our ticket out of this pandemic. We really should be taking that.”

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$2.9 million tax break for Ottawa Porsche dealership receives the green ligh

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OTTAWA — Ottawa city council has given the green light to a $2.9 million tax break for a new Porsche dealership in Vanier.

Council voted 15 to 9 to approve a grant under the Community Improvement Plan initiative to build a Porsche dealership at the corner of Montreal Road and St. Laurent Boulevard.  The project by Mrak Holdings Inc., a.k.a. Mark Motors of Ottawa, would be built at 458 Montreal Road.

Under the Community Improvement Plan approved by Council, business owners can apply for a grant equal to 75 per cent of the municipal tax increase attributable to the redevelopment. A report says the goal of the Montreal Road Community Improvement Plan is to “stimulate business investment, urban renewal and property upgrades in the area.”

Coun. Catherine McKenney was one of nine councillors who opposed the tax break for the Porsche dealership.

“I agree with the Community Improvement Plan, but I know and what people see here is that this application does not meet the criteria,” said McKenney about the CIP proposal for the Porsche dealership.

“A car dealership, no matter whether it’s Honda, or a Porsche or a Volkswagen, it does not first off belong on a traditional main street. This does not the meet the criteria of a CIP, it will do nothing for urban renewal.”

Approximately 70 people gathered at the site of the proposed Porsche dealership Tuesday evening to oppose the tax grant.

Coun. Diane Deans told Council she doubted any councillors who supported the Community Improvement Plan when it was developed in 2019 thought it would support a luxury car dealership.

“I don’t think it fits. I don’t think a clear case has been made that this incentive is required for the Mark Motors project to move forward at all,” said Deans. “I don’t believe there’s a clear community benefit.”

Coun. Riley Brockington, Deans, Jeff Leiper, Carol Anne Meehan, Rick Chiarelli, Theresa Kavanagh, Keith Egli, McKenney and Shawn Menard voted against the tax break for the Porsche dealership.

“It will lead to a $17 million investment on Montreal Road, it will create about 20 jobs in that neigthborhood,” said Mayor Jim Watson.

Watson noted auto dealerships were not excluded from the Community Improvement Plan when approved by committee and Council.

A motion introduced by Watson was approved to use property tax revenue generated by the redevelopment for affordable housing.

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