Tory Budget: What is it Good For?

Benjamin Franklin once wrote, “There is nothing certain in life except death and taxes.”

With that in mind, Canadians were recently handed their first Conservative budget in nearly 14 years. But what does it mean for the automotive aftermarket and independent service providers?

Employer / Employee Apprenticeship Grant

Perhaps the biggest lobbying points for any trade industry, automotive included, has been the notion of an apprenticeship incentive. Economists have been saying for years there will continue to be a shortage of skilled trades people in Canada. The budget calls for a $1,000 taxable grant to be given to qualifying apprentices in the first and second year of their apprentice program, and the lower of $2,000 (or 10 per cent of wages) for employers for each apprentice that employer hires. While both employer and employee can expect to gain from the new formula, questions still persist as to the efficacy of such a plan, especially as the benefits are fully taxable, meaning the actual dollar amount can be anywhere from 12 to 35 per cent lower than the stated figure.

Small Business Tax Break

Most independent shops across the country fall under the moniker of small business. In the budget, the biggest targeted change will come in the form of threshold changes for the lowest business tax rates. Currently, businesses that have an income of up to $300,000 are taxed at a rate of 12 per cent. In the new budget, that ceiling is raised to $400,000, as of January 2007. Furthermore, the 12 per cent figure is slated to be reduced incrementally to 11 per cent by 2009.

Tool Break for Individual and Employee

The good news is that the budget calls for an immediate tax write-off, for any tools purchased after May 2, 2006. If you are a tradesman and you own tools as a condition of employment, you could be eligible for a $500 tax break. A representative from the office of the Minister of Finance clarified this piece of legislation, as applying to individuals as opposed to corporations. As such, it is mechanics themselves and not the garage as a corporate entity that qualify for the tax break. Inexplicably, the tax credit cannot be used towards the purchase of electronic communication or data processing equipment. So while the Conservatives have obviously heeded industry advice on the general concept of a tool tax, issues like electronic vehicle diagnostics and the computerization of the business have not been addressed by this budget.

GST Reduction

On an individual basis, it is difficult to see the one per cent reduction making significant differences in overall consumer spending, but in terms of business decisions, it could make large-scale purchases more enticing. Combined with the tool tax segment of the budget, savings will be possible if one is replacing important, costly machinery or other big-ticket items, but the GST reduction on its own, will not make a significant difference on day-to-day purchases and business costs. Given the change, vendors will have to make alterations to their registers and computer software, so they can be sure to charge customers at the new GST rate of six per cent.