5 things to know about cannabis from Ontario’s latest provincial budget

As the federal government moves to legalize marijuana for recreational users later this year, Ontario’s latest budget sheds light on the province’s approach to sales, distribution, enforcement and revenue expectations.

– The Ontario Cannabis Retail Corporation, an LCBO subsidiary created to manage sales and distribution of recreational pot in the province, is not expecting to generate profits immediately after legalization. It is expecting an $8-million loss in 2017-2018, followed by a $40-million loss in 2018-19, largely due to initial startup costs to establish the retail network. By 2019-20, the province is forecasting OCRC net income of $35 million, followed by $100 million in net income by 2020-21.

– In a bid to crack down on the black market for marijuana in Ontario, the provincial government is creating a Cannabis Intelligence Co-ordination Centre to shut down illegal storefronts.

– The province will create a specialized legal team to support drug-impaired driving prosecutions. As well, it plans to fund sobriety field test training for police officers to help detect impaired drivers.

– Ontario will be providing municipalities with $40 million over the first two years of legalization to help with the costs of dealing with recreational pot. The Ontario Cannabis Legalization Implementation Fund will be funded by Ontario’s portion of the federal excise duty on recreational cannabis, at 75 per cent.

– Ontario plans to apply the full Harmonized Sales Tax, at 13 per cent, to off-reserve purchases of recreational cannabis by a Status Indian, band or band council, similar to tobacco and alcoholic beverages. However, medical cannabis purchased off-reserve from a licensed producer will be eligible for a rebate of the eight per cent provincial portion of the HST.

Feds tighten tax rules for small businesses and passive income in budget

By Craig Wong

THE CANADIAN PRESS

OTTAWA _ The Liberal government moved to tighten the tax rules for small businesses in the federal budget Tuesday as it fine tuned the changes that prompted an uproar last year.

However, Finance Minister Bill Morneau still faces the challenge of corporate tax cuts in the U.S. that have prompted worries that companies will choose to invest there instead of Canada.

In the budget, Morneau opted to hold the line on corporate taxes in Canada, choosing to help businesses in other ways, including with spending to help women-led businesses grow, innovation and diversification of trade.

“We know businesses are concerned about the outcome of North American Free Trade Agreement talks and tax changes in the United States,” he said.

“We will be vigilant in making sure Canada remains the best place to invest, create jobs and do business and we will do this in a responsible and careful way, letting evidence, and not emotion, guide our decisions.”

The minister faced a backlash over his initial plans to change small business taxes last year before backing down on some of the proposed changes and reviving a promise to reduce the small business tax rate.

The government had pitched the changes as a way to prevent wealthy Canadians from gaining an unfair advantage and paying less tax, but small businesses said the changes hurt the middle class.

In the budget this year, Ottawa moved to gradually eliminate the amount eligible for the preferential small business rate as the amount of passive income rises above $50,000 with the small business deduction limit reduced to zero at $150,000. It also moved to limit the advantages that some businesses can obtain when they pay certain dividends.

The changes, which will apply starting with tax years that begin in 2019, are expected to bring in $925 million a year by the 2022-23 fiscal year.

“We are changing the rules for three per cent of private corporations, because the wealthiest Canadians should not be able to use private corporations to pay less tax than the middle class,” Morneau said.

Bruce Ball, vice-president of tax for CPA Canada, said he was happy that the passive income change was a simpler solution compared with other options.

“At the same time though we still believe that they should look at taxation of passive income along with a number of other changes as part of a more general tax review,” he said.

To help crack down on tax cheats, the government will spend $90.6 million over five years to address additional cases that have been identified both domestically and internationally.

Ottawa is also moving to improve the tax rules to prevent what it said was typically Canadian banks and other financial institutions from gaining a tax advantage by creating artificial losses through sophisticated financial instruments. The move is expected to generate roughly $2.5 billion for the government over five years.

It said it would also clarify the application of certain rules for limited partnerships to prevent unintended tax advantages.

The Canadian Chamber of Commerce said the budget included many positive measures, but noted it didn’t address some of the key issues facing the economy.

“The U.S. is engaged in the most massive tax and regulatory changes in our lifetimes. And what they’re doing is making it more attractive for people to do business in the United States. If we’re going to compete, we have to respond in Canada and unfortunately the budget didn’t respond to the that,” said Perrin Beatty, the chamber’s chief executive.

“Their priorities are on spending programs as opposed to programs that encourage growth.”

Dennis Darby, chief executive of Canadian Manufacturers and Exporters, also said more is needed to be done to help Canadian competitiveness.

“Canada is not attracting enough investment. As a result, innovation, growth and productivity are suffering,” Darby said.

While the minister left the corporate tax rate unchanged, the government spending plan did include cash on several fronts to help Canadian businesses and further its key priorities including supporting women in the workforce.

The government said it will make $1.4 billion available over three years in new financing for women entrepreneurs through the Business Development Bank as well as $250 million over three years through Export Development Canada for financing and insurance for women-owned and women-led businesses.

The budget also included $105 million over five years to regional development agencies to support investment in businesses led by women and $10 million over five years to connect women with expanded export services.

To help Global Affairs Canada boost diplomatic and trade support in Asia, the budget includes up to $75 million over five years starting in 2018-19 with $11.8 million per year. The money will include boosting the number of diplomats and trade commissioners in China as well as moves to promote trade with China and other Asian markets.

The government will also provide $191 million over five years to Global Affairs Canada and Natural Resources Canada to support softwood lumber jobs through litigation under the World Trade Organization and the NAFTA dispute settlement mechanisms.

Bank of Canada hikes interest rate on strong economy, but underlines NAFTA risks

By Andy Blatchford

THE CANADIAN PRESS

OTTAWA _ The economy’s impressive run has prompted another interest-rate hike from the Bank of Canada but looking ahead it warned of the broadening negative impact of NAFTA’s uncertain future.

The central bank pointed to unexpectedly solid economic numbers as key drivers behind its decision Wednesday to hike the trend-setting rate to 1.25 per cent, up from one per cent. It was the bank’s third increase since last summer, following hikes in July and September.

While the central bank signalled more rate increases are likely over time, it highlighted the growing, negative impacts related to the unknown outcome of the renegotiation of the North American Free Trade Agreement.

The bank not only made a point of emphasizing the potential negative effects on trade, but also the impacts on business investment in Canada.

Moving forward, the bank said “some continued monetary policy accommodation will likely be needed” to keep the economy operating close to its full potential. The bank said it would also remain cautious when considering future hikes by assessing incoming data such as the economy’s sensitivity to the higher borrowing rates.

Most of Canada’s big banks raised their own prime rates following the announcement.

For Wednesday’s move, the bank couldn’t ignore the encouraging late-2017 data, even as it acknowledged the NAFTA-related risks.

Governor Stephen Poloz stressed during a news conference that the bank remains data dependent, although he conceded a rate hike wasn’t a “no-brainer” this time around.

“Of course, the big cloud over the forecast as well as our discussion is, well, NAFTA,” Poloz said.

“How immediate? How big? Lots of debate around that. Given those uncertainties, of course, the possibility of not moving (the rate) this time was in the air.”

In particular, Poloz noted that some research has found that the trade impacts of the deal’s demise might not have such a major impact on Canada.

However, he stressed that the end of NAFTA would likely take a big bite out of investment in Canada.

“We can’t just relax and assume that it would be a small shock,” he said.

The bank’s latest monetary policy report, also released Wednesday, said that trade-policy uncertainty is expected to lower investment by two per cent by the end of 2019. The report also said new, or “greenfield,” foreign direct investment into Canada has fallen since mid-2016 a possible impact of the trade uncertainty.

The Bank of Canada warned that lower corporate taxes in the U.S. could encourage firms to redirect some of their business investments south of the border. On the other hand, it predicted Canada to see a small benefit from the recent U.S. tax changes, thanks to increased demand.

In explaining the hike, the bank said in a statement that inflation was close to target and the economy was operating roughly at capacity. It also said consumption and residential investment had been stronger than anticipated, reflecting healthy employment growth.

“Business investment has been increasing at a solid pace, and investment intentions remain positive,” the bank said.

Moving forward, the bank predicted household spending and investment to gradually contribute less to economic growth, given the higher interest rates and stricter mortgage rules. It predicted Canada’s high levels of household debt would amplify the effects of higher interest rates on consumption.

Exports have been weaker than anticipated, but are still expected to contribute a larger share of Canada’s growth, the bank said. It also noted that government infrastructure spending has helped lift economic activity.

“Today’s rate hike was a rear-view mirror move, but the Bank of Canada hints that the view out the front window isn’t quite as sunny,” CIBC chief economist Avery Shenfeld wrote in a research note to clients after the rate announcement.

“We share the Bank of Canada’s view that higher rates will be needed over time. But perhaps not as fast and furious as the market was starting to think. The bank’s statement put NAFTA uncertainties right up front.”

The bank also released new economic projections Wednesday in its latest monetary policy report.

For 2017, it’s now predicting three per cent growth, as measured by real gross domestic product, compared with its 3.1 per cent prediction in October.

The bank slightly increased its predictions for 2018, up to 2.2 per cent from 2.1 per cent. It expects the economy to expand by 1.6 per cent in 2019, up from its previous call of 1.5 per cent.

The fourth quarter of 2017 and the first quarter of 2018 are each expected to see annualized growth of 2.5 per cent.

Poloz raised rates in July and September in response to a surprisingly strong economic run that began in late 2016. The hikes took back the two rate cuts he introduced in 2015 to help cushion, and stimulate, the economy from the collapse in oil prices.

Up until a couple of weeks ago, many forecasters still had doubts that Poloz would raise the rate Wednesday. However, two strong reports the December jobs data and the bank’s business outlook survey led many experts to change their calls.

Illegal ride hailing underway in B.C. while government reconsiders laws

By Linda Givetash

THE CANADIAN PRESS

VANCOUVER _ As the British Columbia government explores the impact of allowing ride-hailing services like Uber and Lyft, a number of companies have already been operating illegally in the province.

The Passenger Transportation Branch said at least seven app platforms are known to be in use by drivers and consumers in Metro Vancouver.

An advisory issued by the branch last fall said the drivers, not the app developers, are assuming the risks of running an unlicensed commercial transit service and face fines of $1,150.

Branch director Kristin Vanderkuip told an all-party legislature committee meeting in Vancouver on Monday that $12,650 in fines have been issued to illegal drivers to date. Some of the services have been found in the Victoria area as well, she said.

The branch is trying to educate consumers about the risks of using unlicensed ride-hailing services, she said.

Ted Townsend, communications director for the City of Richmond, said Tuesday it’s difficult to tell how many drivers or services are involved and their exact location because they’re organized online and transcend city boundaries.

Municipalities can’t provide business licences to drivers or app providers because there is no legal framework for them, he said in an interview.

Officials are responding to the issue as they would with any business operating without a licence, he said, but identifying drivers is a challenge.

“It’s difficult to obtain the type of evidence and information that would be required in many cases to take action,” he said. “They’re not bricks-and-mortar type of operations so it’s hard to establish exactly where they’re operating, where they’re based.”

Townsend said a provincial framework around ride-hailing businesses, which the government is exploring through hearings this week, will help cities do their part in licensing or prohibiting services.

In the meantime, he said Richmond is working with the Transportation Ministry and neighbouring cities to crack down on illegal ride-hailing.

The ministry said it has received complaints about the unlicensed companies and has several ongoing investigations.

The Passenger Transportation Branch has issued more than 20 cease and desist orders to vehicle owners across the province, it said.

The ministry warned drivers and consumers about the risks associated with the companies.

“The driver is subject to all penalties for operating illegally on the road the driver is subject to all penalties for operating illegally on the road _ and they are subject to fines of $1,150, as well as further penalties for not disclosing the commercial use of their vehicles to their insurance provider,” it said in an emailed statement.

“Customers need to know that if they choose to get a ride through these apps they are choosing to take a trip in a vehicle that has not been licensed to operate legally and safely in B.C.”

Government of Canada removes processing fee to hire foreign caregivers

When live-in caregiving is more affordable for Canadians who need it most, families can spend less time worrying about finances and more time with their loved ones.

That’s why today, the Honourable Patty Hajdu, Minister of Employment, Workforce Development and Labour, announced the elimination of the Labour Market Impact Assessment (LMIA) processing fee for middle class families seeking to hire foreign caregivers for children, and all families seeking caregivers for individuals requiring assistance due to a physical or mental condition.

Achieving the Minister’s mandate letter commitment to eliminate the $1000 LMIA processing fee for certain families and individuals will support those most in need of financial assistance to meet their family caregiving needs and responsibilities.

Quote

Our government knows that Canadians deserve better access to care for their loved ones. Waiving the LMIA fee will help put care within reach of more Canadian families.
– The Honourable Patty Hajdu, Minister of Employment, Workforce Development and Labour

Quick Facts

  • To provide financial relief to families or individuals seeking to hire foreign caregivers, the Government of Canada is eliminating the $1000 per position LMIA fee for the following two groups:
    • individuals seeking to hire foreign caregivers to provide in-home support for themselves or for another individual (for example, mother, father, brother, sister, son, daughter, friend), who requires assistance due to a physical or mental condition; and
    • families or individuals with less than $150,000 in gross annual household income seeking to hire foreign caregivers to provide childcare in their home to a child or children under 13 years of age.
  • In April 2017, the Government of Canada set a path forward for the Temporary Foreign Worker Program, including fulfilling its commitment to better protect vulnerable foreign workers. This included a commitment to work with community organizations devoted to protecting vulnerable temporary foreign workers to ensure they are informed of their rights and protections when they arrive in Canada.
  • To qualify for the LMIA processing fee exemption for individuals requiring assistance due to a physical or mental condition, a medical certificate from a treating medical practitioner attesting to their condition will be required at the time the application is submitted.

Associated Links

SOURCE Employment and Social Development Canada

Executives Say It’s More Challenging to be a Leader Today

Leading a business is only getting harder, recent research found. In a Robert Half Management Resources survey, 87 per cent of chief financial officers (CFOs) said it is more challenging to be a company leader today than it was five years ago.

But survey results also found many managers enjoy support from their teams. Seventy-nine per cent of workers surveyed expressed confidence in their leaders, while only 6 per cent do not feel confident at all.

Portrait of a young attractive business woman.

Provinces Where Leadership Challenges Have Risen Most
Below are the provinces where the difficulties of being in management have intensified the most over the past five years, based on the percentages of executives who said it is significantly or somewhat more challenging to be a company leader today.

  1. British Columbia (100 per cent)
  2. Alberta (98 per cent)
  3. Quebec (95 per cent)
  4. Manitoba (92 per cent)

Navigating the Changing Leadership Landscape
“Facing an ever-evolving corporate landscape, executives have to deal with the pressures of emerging trends that require them to continually reassess everything from technology and staffing challenges, to regulatory demands and compliance requirements,” said David King, Canadian president of Robert Half Management Resources. “Great leaders understand the fundamentals of their field, but also know that it is the ability to recognize new opportunities through innovation that will ultimately set their business apart.”

King reminds managers to look to their employees for support. “An engaged team is a committed team, and executives who address challenges and opportunities with their employees build a foundation of trust, and shared goals for business growth.”

Robert Half Management Resources details five challenges facing leaders today and the attributes needed to address them:

1. Taking a ‘big picture’ view. As CFOs whose work outside of finance has expanded in recent years know well, executives are no longer tasked with just overseeing their department. They must draw on their strong business acumen, understanding how their unit’s decisions and performance affect the broader organization.

2. Overcoming staffing challenges. Building a skilled team in the face of candidate shortages and retention concerns requires special talents. Business leaders today are tasked with fostering relationships with recruiting sources and developing an effective staffing management strategy, blending full-time personnel with specialized professionals who can be brought in on-demand.

3. Maintaining an edge over diverse competitors. Firms face threats not just from traditional competitors, but also increasingly from organizations disrupting the marketplace with new business models. Organizations need leaders who can anticipate changes in the competitive landscape and inspire innovation to stay on top.

4. Remaining compliant with evolving mandates. Regulatory pressures continue to mount for many industries and companies. Executives today need to be experts on the mandates affecting their business and understand how compliance is more than meeting a set of requirements and can instead help the firm prosper.

5. Keeping up with technology. As history has repeatedly shown, technology can change everything at a moment’s notice. The onus is on business leaders to monitor the technology trends affecting their organizations and positions and adapt accordingly.

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