The Canadian federal budget for fiscal year 1994–95 was presented by Minister of Finance Paul Martin in the House of Commons of Canada on 22 February 1994. It was the first federal budget under the premiership of Jean Chrétien.

Background The budget was tabled only a few months after the 1993 Canadian federal election in which the Liberal Party led by Jean Chrétien received a large majority of the seats in the House of Commons. Paul Martin, Chrétien's main rival in the 1990 Liberal Party leadership election was appointed Minister of Finance.

February 8 Prime Ministerial Statement On 8 February 1994, the prime minister Jean Chrétien delivered a surprise prime ministerial statement in the House of Commons to announce a federal action plan on tobacco smuggling:

Excise taxes on tobacco were dramatically reduced, with additional reductions in provinces that agreed to reduce their provincial excise taxes. Additional excise taxes were to be imposed on exported tobacco products, along with a surtax on tobacco manufacturing profits.

Taxes Personal income taxes The budget reduced or repealed several tax incentives: The $100,000 lifetime capital gains exemption was repealed; The first $25,000 of employer-provided life insurance was to be considered a taxable benefit; The age tax credit was reduced; Only 50% of meals and entertainment expenses could be deducted (down from 80% pre-budget).

Corporate income taxes The budget also reduced several tax incentives: Investment Tax Credits rates were reduced; The Special Investment Tax Credit and the regional component in respect of R&D were eliminated; R&D expenses and the small business deduction calculations were tightened for private corporations; New rules were implemented to limit tax avoidance during divisive corporate reorganizations.

GST and other taxes Along with the reduction in the deductibility of meals and entertainment expenses, the proportion of GST that could be claimed on these expenses as an input tax credit was also reduced to 50%.

Expenditures

Transfers to provinces The budget announced the freezing of Canada Assistance Plan (CAP) payments to their 1994-95 levels after March 31, 1995. Unlike the 1990 restrictions, all provinces (including those receiving equalization payments) were affected by the cap.

The Reform Party (then the third party by number of seats in the House) supported reductions to the CAP while criticizing that the cutbacks were not matched by amendments to health national standards to give more freedom to provinces in adjusting the services they provide.

Aftermath Legislative history Budget Implementation Act, 1994 The main provisions of the budget were included in the Budget Implementation Act, 1994 which was adopted in third reading by the House of Commons on 31 May 1994 and received royal assent on 15 June 1994.Debates of the House of Commons – May 31, 1994 Votes followed party lines with the notable exception of independent Québec MP Gilles Bernier (Beauce) voting in favor. + House of Commons vote on the Budget Implementation Act, 1994House of Commons Debates, 35th Parliament, 1st Session, vol. 2, p. 4679.Party Yea Nay AbstentionAbsentLiberals 136 0 8 33Bloc Québécois 0 43 8 3Reform 0 40 0 12New Democratic 0 8 0 1 Progressive Conservative 0 0 0 2Independents 1 0 0 0Total 137 91 16 49

Other bills Income tax measures were implemented through Bill C-59, which was read a third time and passed on 21 February 1995 in a 129–64 vote and received royal assent on 26 March 1995. Changes announced in the 8 February Statement and the reduction of the GST input tax credits claimable on meal and entertainment expenses were legislated through Bill C-35, which received royal assent on 23 June 1994.

+ Third reading vote on Bill C-59Party Yea Nay AbstentionAbsentLiberals 129 0 17 31Bloc Québécois 0 25 17 11Reform 0 33 0 19New Democratic 0 6 0 3 Progressive Conservative 0 0 0 2Independents 0 0 0 2Total 129 64 34 68

Notes and references Notes

References

Budget documents

Enacted legislations