An Analysis of key issues of the 2021 Federal Budget: Black Entrepreneurship, Childcare Infrastructure, and Tax Implications to the Black Canadians

The Federal Government has over the years made several investments which the Black Canadian population can tap into. The recent budget for 2021 proposed to spend $30 billion towards childcare, $200 million towards Black Entrepreneurship Fund, and some tax adjustments which may potentially affect Black communities. In September 2020, the Federal Government launched a raft of measures to support Black Entrepreneurs. The support measures include up to $53 million to create and fund the National Ecosystem Fund (NEF) with the goal to address the systemic issues of funding to the Black-led business and non-profit organizations across Canada. Specifically, the NEF funding included support to black-led organizations through mentorship, access to capital, financial planning, and business training to Black Entrepreneurs. An additional lending support facility of $128 million was availed through partner organizations such as major banks such as RBC, BMO Financial Group, CIBC, National Bank, TD, Vancity, and Alterna Savings. A total of $3.3 million was set aside to create the Black Entrepreneurship Loan Fund of up to $1.5 million. A total of $6.5 million was set aside to create a Blank Entrepreneurship hub and more funding was availed to conduct more research on and meet the needs of Black Entrepreneurship in Canada including further research through Statistics Canada. To achieve a high impact on supporting the targeted Black-led organizations through Funding, the following three pillars were established on the Black Entrepreneurship Program;

1. Black Entrepreneurship Loan Fund

This is a collaboration between the government of Canada and Black-led organizations and several financial institutions such as RBC, BMO Financial Group, CIBC, National Bank, TD, Vancity, and Alterna Savings. The goal is to provide loans up to a maximum of $250, 000 to black entrepreneurs and business owners. The loans are accessible through the Federation of African Canadian Economies (FACE). The Eligibility criteria consider three factors;

i. Individuals who self-identify as Black or organizations that have at least 51% of the shareholding under the control of Black Canadians;

ii. The would-be beneficiaries should be legal residents of Canada such as Permanent Resident or refugees who can only access small loans;

iii. Beneficiaries to have celebrated at least their 18th birthday.

a)  The National Ecosystem Fund

The National Ecosystem Fund (NEF) was created to build the capacity of Black-led business organizations across Canada through a raft of measures such as mentorship, financial planning, and business Training of the Black entrepreneurs.

b)  Black Entrepreneurship Hub

The Black Entrepreneurship Knowledge Hub was set up to be a conduit for conducting research on Black Entrepreneurship in Canada. Issues of research include investigating the barriers to Black business success as well as identifying potential opportunities for growth. The research is being done in collaboration with Black-led nonprofits and business partners in conjunction with educational institutions.

Updates on the Funding to Black-led businesses and organizations 

On March 24th, the Royal Bank of Canada announced that it has committed $100 million over 5 years towards funding small businesses through loans to black entrepreneurs. The money is to be split into two components of the theory program namely the Black Entrepreneurship Start-up program and the Black Entrepreneurship Loan Fund. The underlying goal is to enable economic growth and wealth creation in Black Canadians through financial inclusion, mentorship, and access to funding. The RBC bank also provides a platform for the black community for engagement to learn from a successful community of entrepreneurs.

2. Child benefit

The 2021 Federal budget allocated $30 billion over the next 5 years with $8,3 billion earmarked for supporting the vision of improving the quality of Early Learning experiences of children and substantially reducing the cost of daycare across Canada. These goals, among other things, seek to build upon the past momentum and collaboration with stakeholders such as provincial government, non-profits, and municipalities in providing high-quality, affordable, and accessible early learning systems across the country. The Federal funding will be availed through the provincial, territorial, and Indigenous partners to support family’s access to quality and affordable child care regardless of the location of residence.

Studies by TD economics have shown that investing $1 in childcare has a multiplier effect of between $1.50 and $2.80 in the economy[1]. Thus, ultimately, over the next 5 years, the funding on childcare infrastructure will allow for an immediate 50% reduction of costs of daycare by 2022 across Canada and excluding Quebec which has its own model which has been working well. The funding will also support the building of more childcare spaces across Canada and will be disbursed through provinces and territories. All these investments are forecast to ensure access to high-quality early learning and childcare across the country for an average of $10/day. In other words, ultimately, the Federal funding will subsidize the daycare to an average of $10/day across the country, lower than the current rates. The Childcare Infrastructure goals will be achieved through the following means;

i. Supporting Accessible Childcare Spaces

The 2021 federal budget allocates $29,2 million over 2 years from 2021-22 through the Employment and Social Development Canada via the Enabling Accessibility Fund to support childcare centers. The support aims to improve physical accessibility and directly support over 400 childcare centers through the construction of structures such as washrooms and accessible doors and play structures for children with disabilities.

ii. Addressing the needs of Indigenous Families and Communities

Supporting early learning programs for Indigenous families and communities to give their children a jump-start life. This proposed investment is for $2.5 billion over the next 5 years.

iii. Bringing Partners Together and Maintaining a Canada-Wide Child Care Systems

The Federal leadership to open a collaborative relationship with partners and stakeholders to address the family’s needs. In early learning and childcare infrastructure addition to the 2020 Fall Economic statement, $34.5 million was proposed over the next 5 years to strengthen capacity within the New Federal Secretariat on Early Learning and Childcare.

3. Taxation Measures
a) Personal Tax Rates

Tax is an especially important parameter for the transfer of wealth. The FBC stakeholders can benefit by understanding the implications of the current and next tax rates. The good thing is the personal income tax rates have remained unchanged in the Federal budget of 2021. See Table 2.1 below for more information on personal tax rates.

b) Tax Treatment of COVID-19 Benefit Amounts

As noted in the 2021 Federal budget, the proposal to allow individuals the option to claim a deduction in respect of the repayment of a COVID-19 benefit amount in computing their income for the year in which the benefit amount was received rather than the year in which the repayment was made is an important one to the FBC stakeholders. First, this option will be available for benefit amounts repaid at any time before 2023 and it is a departure from the previous fiscal years wherein a benefit amount was only deductible in the year of repayment.

Table 1.2 Federal tax rates for 2021

Tax rate (%)Income bracket
15On first taxable income up to $49,020 +
20.5$49,020 of taxable income – $98,040 +
26On next $53,939 of taxable income on the fraction of taxable income over $98,040 up to $151,978+
29On next $64,533 of taxable income on the fraction of taxable income over $151,978 up to $216,511+
33On taxable income over $216,511

Source: https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html

In addition, for those who received the COVID-19 related benefits received and reside in Canada even though they may be considered non-resident persons, the 2021 budget proposed that the income tax of the taxable amount shall be levied in a similar manner to employment and business income earned in Canada. This is important for tax planning purposes.

c) Taxes Applicable to Registered Investments

Another important development from the 2021 Federal budget is the provision of a tax on registered investments that are held by a limited number of investors. This has implications for individuals who fall in this category and therefore there is a need to understand the bottom line on taxation going forward.

d) Other Personal Tax Measures

As noted earlier, the 2021 budget proposed a continuation of the Support Canada Workers Benefit (SCWB). The SCWB is proposed to increase in phases (i.e., phase-in and phase-out rates fashion). Also, the threshold to introduce a “secondary earner exemption” for individuals with an eligible spouse was updated. In particular, there was an update on the list of mental functions of everyday life that is used for eligibility for the Disability Tax Credit (DTC). This is important because the COVID-19 pandemic has exerted a strain on the mental well-being of people.  Hence having a system to support mental wellness is a welcome measure.

In addition, the budget 2021 recognizes more activities in determining time spent on life-sustaining therapy and reducing the minimum required frequency of therapy to qualify for the DTC. The budget 2021 also notes the need to fund consultations to reform the eligibility process for federal disability programs and benefits for the following goals.

  1. Increase access to the travel component of the Northern Residents Deduction;
  2. Incorporate postdoctoral fellowship income in “earned income” for RRSP purposes;
  3. Offer one-time payment of $500 in August 2021 to OAS pensioners over the age of 75 as of June 2022 and increase regular OAS payments for pensioners 75 and over by 10 percent on an ongoing basis as of July 2022.
e) Other Measures

Under the other measures, there were important updates as explained below.

 i. Information Requirements – Input Tax Credits

The 2021 Federal budget proposed a change in the documentation requirement thresholds from $30 – $150 to $100 – $500. The justification is to allow more flexibility for taxpayers to support their input tax credit claims. Also, this change is aimed at enabling the purchaser to rely on the GST number of the billing agent, rather than the vendor. This measure is effective April 20, 2021.

 ii. GST New Housing Rebate

Notable under this heading is the proposal to ease out the condition for buying a new house when two or more people are involved. In this case, the 2021 budget noted that the previous condition created challenges for qualification, especially in situations requiring co-signing of a loan. Consequently, the GST new housing rebate will now be available where two or more individuals buy a new home together, as long as any one of those individuals is acquiring the new home as their primary residence. In addition, this applies whether it will be an owner-built home, purchased from a builder, co-operative housing, and homes constructed on leased land. No change was proposed to be made to alter the threshold or amount of the rebate. This measure will be effective April 20, 2021.

f) Tax on Unproductive Use of Canadian Housing by Foreign Non-resident Owners

The issue of unproductive use of Canadian Housing by foreign non-residents owners has been in the news for a while now. To address this issue, the 2021 budget proposed to levy a new national 1 percent tax on the value of non-resident, non-Canadian owned residential real estate considered to be vacant or underused annually and effective in 2022. Additionally, in early 2023, all owners of residential property in Canada, other than Canadian citizens or permanent residents of Canada, will be required to file an annual declaration for the prior calendar year with the CRA in respect of each Canadian residential property they own regardless of whether the owner is subject to tax in respect of the property for the year. The owner may also be eligible to claim in their declaration an exemption from the tax in respect of a property for the year. Importantly, over the coming months, the Government will issue a backgrounder to give stakeholders an opportunity to provide feedback on further components of the proposed tax.

Concluding remarks

The report summarized the three issues of great importance to the Black Canadians which the Federation of Black Canadians seeks to support. Therefore, it is imperative that a deeper analysis be conducted on how the three issues can be beneficial to the grassroots audience of the FBC. While this is a good starting point, the information would be more helpful if it is broken down further into easy to understanding format for the audience.

Consulted sources:

1.      https://www.mnp.ca/en/insights/directory/2021-federal-budget-highlights

2.      https://www.budget.gc.ca/2021/home-accueil-en.html

3.      https://www.rbcwealthmanagement.com/ca/en/research-insights/federal-budget-2021/detail/

4.      https://facecoalition.com/en

5.      https://www.td.com/document/PDF/economics/special/di1112_EarlyChildhoodEducation.pdf


[1] https://www.td.com/document/PDF/economics/special/di1112_EarlyChildhoodEducation.pdf