2018 was a particularly active year for headline-grabbing news items impacting our economy. As the end of the year draws near, let’s take a look back at a few that will continue to have an impact into 2019:
Prime Rate – Continuing to Climb
After its lengthy downward trend ended in mid-2017, the Bank of Canada’s Prime Rate continued to climb throughout 2018, impacting anyone with a variable rate mortgage, auto loan, or line of credit.
With one more rate announcement (and potential rate hike) to go before the end of the year, the current rate stands at 3.95%. Compared to last year’s closing rate of 3.2%, the cost of borrowing has effectively increased by over 23%.
Housing Market – Starting to Cool
According to the Canadian Real Estate Association (CREA), the number of residential sales nationwide declined by over 10% in 2018, compared with 2017. The average selling price of homes also decreased in 2018 (dropping more than 4% year over year), after peaking in the Spring of 2017.
Rising interest rates (see above) and new government-imposed “stress tests” have been singled out as sources for the downward pressure being experienced by the housing market.
Cannabis – No Longer a Crime
Consumers of marijuana products rejoiced on October 17th of this year, as Canada became the second country in the world to fully legalize Cannabis (Uruguay was the first, in 2013).
The good news: the commercial sale of legal cannabis products is expected to generate hundreds of millions in tax revenue annually, to be split between the federal and provincial governments.
The bad news: the federal agency tasked with overseeing the licensing and taxation of cannabis production is the Canada Revenue Agency. It remains to be seen how this added responsibility will impact CRA’s ability to administer the country’s income tax regime.
Clarity (and some relief) from Morneau
Federal finance minister Bill Morneau provided some clarity (and relief) to small business owners, announcing earlier this year that the federal tax rate on small business income will drop to 9% (from 10%), effective January 1, 2019. He also announced that small businesses earning investment income will still have full access to this lower rate (on active business income), as long as investment income does not exceed $50,000 for the year.
These announcements provide some relief to business owners targeted by the finance minister’s July, 2017 proposals (read our earlier discussion on this here), and offer clarity and more certainty to income tax practitioners.
These are just a few of the stories that dominated the national headlines for the year. Read more about the B.C. Provincial Government’s overhaul of the MSP and the new “employer health tax” here.
Feel free to contact us today if you have any questions or concerns regarding the above, or if you are in need of any of our other services.