Canada Budget Winners and Losers: Startups, Clean Tech Gain

Morneau: Canada to Balance Budget in 5 Years
  • Universities among winners, with C$2 billion for buildings
  • High-income earners will lose benefits and see taxes go up

Here are the winners and losers from the fiscal plan delivered Tuesday by Canadian Finance Minister Bill Morneau in Ottawa.

The Winners

* Universities and students: The budget sets aside C$2 billion ($1.5 billion) over the next three years for universities to renovate and construct new buildings and research labs. It also adds C$95 million a year to the pool Canadian scientists have to draw upon to fund their research. The tone of the chapter on science funding makes clear the government supports basic research that might not have immediate commercial applications. The budget increases the amount the government spends on grants for low- and middle-income students to C$1.53 billion over the next five years.

* Indigenous communities: Morneau’s budget follows up on Prime Minister Justin Trudeau’s promise to reshape the government’s relationship with Canada’s native people, planning for C$8.4 billion in spending over five years to upgrade infrastructure, social services and education in indigenous communities. Some C$2.6 billion of that will be directed toward schools on first-nations reserves, where only 38 percent of people between 18 and 24 have graduated high school, compared with 87 percent for non-indigenous Canadians.

* Startups: The budget made no mention of stock options and Morneau told reporters it was not in the government’s plans. The Liberals campaigned on a promise to increase the amount of stock options that are taxed as income. The country’s new crop of fast-growing tech startups such as Shopify Inc. and Hootsuite warned that would limit their ability to attract the best employees, who often take shares in a company with the promise that, if they succeed, their return could be in the millions.

* Veterans: Funding for veteran support centers in smaller Canadian cities was cut under the previous Conservative government. The Liberal budget restores that funding, promising C$78.1 million over five years to upgrade healthcare and support for former soldiers. The budget also increases the amount of money the government expects to spend on helping retired and injured soldiers to C$1.6 billion over the next five years.

* Infrastructure companies: While the ramp-up in infrastructure spending may not be as fast as some had expected, the government is still committing C$120 billion in spending over the next decade, double the pledge of the previous government. Spending on transit, schools and hospitals will be C$11.3 billion over the next two years. Engineering and construction firms like SNC Lavalin Group Inc., Aecon Group Inc., Stuart Olson Inc. and Bird Construction Inc. are among the potential winners.

* Clean tech: The budget provides C$1 billion over four years for clean-technology development, including extra money for a government-run venture capital fund that focuses on fields related to sustainable technology. There are also special tax incentives for clean-tech companies and funding for electric-car charging stations.

The Losers

* Small business owners: The Liberals campaigned on maintaining reductions in the small-business tax rate the previous government had put in place. The rate was set to eventually drop to 9 percent by 2019, but the budget freezes the rate at the existing 10.5 percent.

* High-income earners: Canadians who earn more than C$200,000 a year will see their taxes go up, and their eligibility for the childcare benefit begun by the previous government taken away. They also won’t qualify for the increased spending on grants for post-secondary education and will have to shoulder the costs of their kids’ education and text books after the government scrapped tax credits on those items.

* Charities: The previous government had set a plan to begin allowing people to avoid capital gains taxes on stocks and real estate donated to charities. Morneau’s budget cancels that planned change, eliminating a possible new flow of cash to charities.

* Medium-sized cities: The budget provides C$3.4 billion over three years for upgrading transit infrastructure, but distributes it to municipalities based on existing ridership. That means the country’s largest transit systems in Montreal, Toronto and Vancouver, will get the bulk of the funding, leaving smaller cities like Winnipeg or Halifax with barely anything.

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