REGINA, Sask. — There were a lot of major projects and tax measures announced in this past week's federal budget, delivered by Finance Minister François-Philippe Champagne, but not a lot of new information, according to KPMG.
Robert Glasgow, a partner with KPMG Law, said “a lot of the measures that are being paid for in this budget are things that were already announced.”
“There's not a lot of new news here. We have the productivity mega-deduction, which was announced. We have a number of measures to cope with the U.S. trade war that were previously announced and here are being accounted for. A lot of the AI development money is just reiterations of old commitments. So there's not a huge amount of new-new.”
However, Glasgow said, “things like the productivity mega-deduction are really important, and they represent a different type of spending.”
“It's less direct transfers. It's less direct money going into pockets, and it's more trying to incent business to make investment. If they don't, then they don't get anything, and if they do, then they get a very beneficial tax cut.”
One area that stood out was the tax measures and changes proposed. Glasgow said many of these changes are “corporate-focused.”
He said the changes with respect to registered retirement savings plans (RRSPs) are “about streamlining the efficiencies, so you'll no longer have to switch over from the RRSP to the RRIF when you hit the retirement age. So that will make it simpler. It's not going to change fundamentally a lot of the rules. There will still be a mandatory withdrawal process when you get 71, and there will now be some accounting for allowing spouses a rollover to simplify the process. So there's a number of these sort of simplification measures. There wasn't a really major overhaul of the system wholesale, but there were a number of these steps. There's also a number of kind of boutique credits that have been pushed through the system. There's a number of credits, for example, for artists to exempt a certain amount of their income from creative endeavors. There's increased funding for hockey rinks and for certain athletic programs. So that's going to be interesting to watch. Like with most of these boutique measures, it becomes important to track what you're spending on and where your income comes from to see if you can fall within any of those boutique cuts.”
As for major projects, Glasgow said the budget includes a “recommitment to major projects, and the major projects is getting its own management office to try to increase coordination between the projects.”
“In terms of the major infrastructure, we've also seen one of the new measures was more funding for electrification and for increasing electricity generation, including nuclear energy and small modular reactor commitments, as well as the energy grid, which is really important, especially considering the new data centre projects going up in Saskatchewan. And that this will be critical to supplying those projects going forward in a cost-effective manner.”
As for other measures specifically affecting Saskatchewan, Glasgow pointed to a couple of programs.
“For example, the farm succession tax measure has been amended so it no longer can just flow to children, but now will be able to, once effective, flow to spouses and common-law spouses, to nieces and nephews or to nieces and nephews of your spouse or common-law spouse.”
He said that “simplifies some of the farm's succession planning. Similarly, there were some concerns because the livestock tax deferral regime previously applied primarily to drought conditions, but now it also will be applying to flood or excessive moisture conditions. So there's also been some work around the edges on the agriculture side.”
Overall, he said the budget was “not quite as ambitious as I think some people might have wanted, and there wasn't as much of an overhaul of the tax regime. I think that that was one of the areas that business leaders were hoping to likely see a little bit more on.”
“Having said that, if you're not going to do a wholesale change, a lot of the sculpting that they did and the simplification that they did does fit with the demand that business leaders had. Similarly, one of the problems we have is that the government has slowly released a number of these measures and announced the measures ahead of budget season. So instead of saving everything up for one big bang, we ended up with lots of measures being announced and only now being implemented.”
Glasgow pointed to business leaders wanting to see steps to improve the investment environment in Canada. The previously announced productivity mega-deduction will help achieve those goals, he said.
“Same thing with some of the capital gains deferral for founders. That will help with those goals. So there is a number of these measures that will help. Having said that, I do think that there likely would have been space and would have been a desire for the government to go a bit bigger, especially on the tax reform piece.”
As for spending, with another deficit budget of $62.3 billion being projected, Glasgow noted that it is slightly less than originally projected in the spring estimates.
“Now a lot of that is because of increased commodity prices, which generates increased tax revenues. That also enabled the government to actually retroactively cut last year's deficit fairly significantly because of higher realized revenues from that year. We are seeing this long, slow tailing off, which is appreciated. I think there is a lot of desire to get back to a lower level of deficit spending.”
But Glasgow said at the same time, “you have to balance that against the current economy and the need to continue to support Canadian businesses, given the ongoing trade and tariff issues.”
“Until we can have a long-term sustainable deal with the American government that will allow Canadian products to flow more smoothly into the U.S., both for just general products, but also specifically autos and steel and aluminum, there's always going to be the need for these kind of support measures. Having said that, hopefully we can continue to discuss with the American government, and if we can reach a deal with the American government that's beneficial for all parties and is a fair and equitable deal, then you will be able to see the government start to pull back from some of those trade support measures.”
As an example, he said the trade support measures enacted as a result of the Section 338 tariffs were a line item of about $12 billion.
“That's $12 billion that potentially does not have to become a recurring expense. That can be money that can come off the books for future years, and so that can help reduce some of that deficit on its own, notwithstanding also the additional growth that the removal of tariffs and counter tariffs would have.”
Glasgow believes the government “has an opportunity here to move forward with these American negotiations. I think that there's an opportunity to try to improve the Canadian competitiveness environment and the Canadian productivity environment. I think this government is putting a lot of emphasis on those areas, and if that works and if we do see more economic activity, we do see more investment, that will be highly beneficial.”
He also sees an opportunity with data centres, pointing to results of ballot measures where “overwhelmingly various states have placed caps or limits on AI development and data centre development.”
“Especially if you're improving the energy grid, you're improving electrification, you're going big on nuclear to generate lots of electricity, then Canada is really well placed to take a big step on AI development and infrastructure and IP development, and that could be a huge opportunity. I think the government is starting to lean into that with the electrification plans, and if that ends up paying off, then that will have major positive impacts down the line.”
