We have compiled a list of Tax Changes and adjustments that are anticipated to affect most Canadians in 2024.
The details here offer estimates for elevated payroll taxes, mandatory contributions to the Canada Pension Plan and Employment Insurance. It also covers increases in carbon and alcohol taxes plus the effect of the possible Digital Services Tax.
Canada Pension Plan
The maximum pensionable earnings subject to CPP tax are set to rise. In 2024, both employers and employees will need to contribute $3,867. This results in a $113 tax hike for both parties (applicable to individuals earning $68,500 or more). Additionally, a second CPP tax, known as "CPP2," will be implemented from 2024 onwards. CPP2 applies to income falling between $68,500 and $73,200, with a maximum tax amount of $188 in 2024. Essentially, CPP2 represents an additional tax on income exceeding the original CPP taxable income, up to a new threshold of $73,200. Consequently, the total CPP tax for individuals earning $73,200 or more will be approximately $4,055, reflecting a total increase of $301 (CPP + CPP2) in 2024.
Employment Insurance
The EI tax rate and maximum insurable earnings are slated for an increase in 2024. This adjustment necessitates employees to contribute $1,049, while employers will be required to contribute $1,469 to EI. For individuals earning $63,200 or more, this translates to a $47 EI tax hike for employees and a $66 increase for employers.
In total, federal payroll taxes (CPP and EI tax) for a worker earning $73,200 or more will amount to $5,104 in 2024, with employers also obligated to pay $5,524.
Carbon Tax
On April 1, 2024, the federal government's carbon tax is scheduled to rise from $65 to $80 per tonne. This adjustment will elevate the existing carbon tax rate from 14.3 cents per litre to 17.6 cents per litre of gas. At this increased rate, each refueling of a 70-litre minivan will cost approximately $12.32 in carbon tax for a family. With the exception of Quebec, taxpayers in every province and territory are obligated to pay this federal carbon tax rate.
Second Carbon Tax
In 2023, the federal government introduced a secondary carbon tax via fuel regulations. Fuel producers failing to comply with the stipulated regulations will be compelled to pay this additional carbon tax. Projections from the Parliamentary Budget Officer (PBO) suggest that the second carbon tax is likely to raise the cost of gasoline by a maximum of 17 cents per litre. By 2030, the PBO's analysis indicates that this measure could result in an annual expense of $384 to $1,157 for the average household.
Home Heating Oil Carbon Tax Exemption
The federal government has declared a temporary suspension of the federal carbon tax on furnace oil for a three-year period. This entails a reduction of 17 cents per litre for households utilizing furnace oil until April 2024, followed by a 21 cents per litre reduction thereafter.
Alcohol Taxes
Effective April 1, 2024, the alcohol escalator tax will raise excise taxes on beer, wine, and spirits in accordance with inflation. Presently, taxes contribute to roughly half of the price of beer, 65 percent of the price of wine, and over three-quarters of the price of spirits.
The alcohol escalator is anticipated to lead to a 4.7 percent upswing in the federal excise tax on beer, wine, and spirits in the year 2024. This increment is projected to incur a cost of approximately $100 million for taxpayers in the fiscal year 2024-25.
Digital Services Tax
Legislation introduced by the federal government in November 2023 lays the groundwork for a digital services tax (DST). The Parliamentary Budget Officer (PBO) estimates that the DST could result in a cost of $1.2 billion for taxpayers in 2024, though this revenue projection is contingent on the timing of the tax's implementation.
The DST specifically targets large companies engaged in online marketplaces, social media platforms, and those generating revenue from online advertising, including entities such as Amazon, Google, Facebook, Uber, and Airbnb. Consumers should anticipate higher prices as a consequence of this tax. An analysis of the French Government’s digital services tax reveals that approximately 55% of the overall tax burden was transferred to consumers, 40% to online vendors, and only 5% was shouldered by the digital companies directly affected by the new tax.
Other Tax Changes
In the fiscal plan of 2023, several tax-related measures were introduced:
- Commencing January 1, 2024, a two percent tax on share buybacks was implemented.
- Adjustments were made in Budget 2023 to ensure that financial institutions are subject to taxation on dividends received.
- The global minimum business tax agreement is being enforced, wherein any business situated at least partially within a signatory country will be subject to a minimum tax rate of 15 percent.
- The Alternative Minimum Tax rate for higher income earners has been increased from 15 percent to 20.5 percent as per Budget 2023.
- The federal government is eliminating the Goods and Services Tax (GST) from purpose-built rental housing and psychotherapy and counselling therapy.
If you have any questions regarding how these tax increases will affect you’re your business or your personal life, please contact our office for a review of your situation.