The Canadian government unveiled on Tuesday April 16 new taxes on the richest to finance housing in particular and attract younger people, hit by the increasing cost of living.
The Minister of Finance, Chrystia Freeland, presenting her federal budget, forecast more than 20 billion Canadian dollars (13.6 million euros) in revenue over five years, mainly thanks to this new tax system. And while it expects its economy to slow down in 2024, it believes it can avoid recession, despite relatively high interest rates weighing on the economy.
Most of the new spending is aimed at the education, housing and jobs sectors, all pressure points for young voters. With more than 10 points behind his main rival, Conservative leader Pierre Poilievre, in the polls, Liberal Prime Minister Justin Trudeau must regain the support of Canada’s youngest voters who brought him to power in 2015 in order to to win the elections scheduled in a little over a year.
For young people, ‘hard work doesn’t pay off’
“Today, a carpenter or a nurse can pay taxes at a marginally higher percentage than a multi-millionaire. It is not fair. This must change, and it will change,” Freeland said Tuesday. The latter promised “fairness for every generation.”
“For too many young Canadians, especially millennials and Gen Z, it feels like their hard work isn’t paying off,” she said. “They don’t benefit from the same conditions as their parents and grandparents,” she added. With the rising cost of living a major concern for most Canadians, Ms. Freeland’s budget presents a series of new spending to reduce household bills.
The government has also pledged, amid a housing crisis, to build an additional 3.87 million homes by 2031 “at a pace and scale not seen since the post-Second World War era.” Ms Freeland told Parliament. To do this, Ottawa will open public land for housing, convert federal offices into apartments, and tax vacant properties.
New home prices fell slightly in March, but not enough to offset rising mortgage interest costs that kept many new buyers out. Inflation has been below 3% since January, but so far without leading to any relief in interest rates set by the Bank of Canada.
Growth revised slightly upwards
The budget also provides money for a program allowing free contraception, strengthening budgets to fight wildfires and more resources to prevent foreign interference. In anticipation of a fire season that promises to be catastrophic, Ottawa is also doubling the tax credit for volunteer firefighters.
Separately, economists surveyed by the government have revised upwards forecasts now calling for growth of 0.7% this year, compared to 0.5% predicted in the November economic report. Ms. Freeland explained that the national debt would increase slightly in the 2024-2025 fiscal year to reach a new record of C$1.3 trillion.
Canada’s debt-to-GDP ratio is expected to fall to 41.9%. As for the deficit, it is expected to be a little lower than expected, at C$39.8 billion, and remain stable before starting to decline in 2026-27.
