Madam Speaker, I did not have a chance the last time I spoke in the House to thank the constituents of Coast of Bays—Central—Notre Dame for putting me back in office. I would like to do that now. The vast majority of them have been doing so for five elections now. I keep testing the limit every time I run out there. Nevertheless, I want to thank them for their generosity and for giving me the opportunity of a lifetime to represent them in the House of Commons in the nation's capital. Indeed, it is the opportunity of a lifetime for all of us to sit in the House of Commons.
I am honoured also to talk about a bill this morning that we talked about much during our campaign. We talked about it as a way of helping the middle class of this country grow Canada's economic engine. We faced challenges as we started the campaign, and the challenges continue to this point. Right now, we have challenges in certain aspects and geographic areas of this country that are certainly unprecedented. I talk of the price of oil and natural gas. I also talk about the fact that many of the provinces also find themselves in a precarious situation given the fact that a lot of their revenues are based on royalties and taxes they collect from this particular sector. We also have a low dollar, something that for many people may produce some opportunities but in other cases could provide many challenges. It too is at an unprecedented level of less than 70¢ to the American dollar now.
I want to talk today about Bill C-2 and some of the measures we hope to bring forward that would provide some tax relief to Canada's middle class. As I said before, the middle class is the economic engine of this country. When I say the middle class is the economic engine of this country, I am talking about the individual talents of those individuals and their ability to provide a living for their families.
For example, in my area of Newfoundland and Labrador the greatest exports right now in dollar value alone would be seafood exports. We also have mining and forestry and many other sectors with great exports. To be honest, one of the greatest and most exciting exports that we have right now in central Newfoundland, the area that I predominantly represent, is the people and their talents.
We do have skilled people in the oil and gas sector but we also have many skilled people in other sectors such as mining. They have a skill and a trade that they export around the world. Each and every week I travel from my home riding to Ottawa or to other parts of the country, I run into people that I have grown up with or I talk to people that I have met in my tenure as a member of Parliament. These people talk to me about the areas where they have been or where they are going, such as Russia, the North Sea, northern Africa, or Alberta, Saskatchewan, and British Columbia right here in Canada. In the field of hydroelectricity, they have travelled to Quebec and Manitoba. It is phenomenal how they do this. They travel vast distances. They go away for weeks at a time then return home and bring that wealth home with them. This is a precarious position for them right now, given the situation in the oil and gas sector. Some people would say that the reason they have created that value is the oil and gas itself, but I would disagree. What created that value for them was their own talent and ability to adjust to the world markets. On the one hand, I am worried about the price of oil and gas in this country and around the world, but on the other hand I am not worried because of the versatility these individuals have shown over the past while. The majority of them are certainly in that middle-class income bracket.
I am pleased to participate in this important discussion on the government's middle-class tax cut. My objective today is twofold. First, I want to provide the House with a quick assessment of our economic and fiscal situation and, second, I want to tell members why the middle-class tax cut would help grow our economy.
As we embark on an agenda of economic growth and long-term prosperity, there is no doubt that we are facing considerable headwinds as I discussed earlier. Globally we continue to experience what International Monetary Fund Managing Director Christine Lagarde famously called “the new mediocre”. In its latest economic outlook in January, the IMF expects global growth to pick up modestly to 3.4% in 2016 and 3.6% in 2017. This is down 0.2 percentage points for both 2016 and 2017, compared to its October 2015 world economic outlook.
Though the recent performance of the U.S. economy is encouraging, the European and Chinese economies are cause for concern. We have seen this happen in Europe now for the past seven years and most recently with the Chinese economy. Although China's GDP is very large and is still growing, it is not growing as much as it did in the past four to five years. Many if not all of us here have experienced the benefit of global trade and have had conversations with people in business in our ridings who deal with many Chinese companies. Members, of course, know of what I speak.
As I mentioned earlier, global crude oil prices remain at less than half of what they were in mid-2014 due to persistent global oversupply and softening demand. What is happening beyond our borders has real and tangible consequences for us all.
In Canada, our economic performance in the first half of 2015 was poor, mainly due to the collapse of oil prices in 2014. Consider this. Last April, just to put some numbers on this, the government projected an oil price of $71 a barrel by the end of this year. As I speak, oil is now trading at about $30 a barrel, less than half the projected price. As I mentioned earlier, coming from Newfoundland and Labrador, I know how we are hit directly and indirectly by the resulting large hole in our provincial budget. We are directly hit, of course, because our offshore exploration has diminished and it is our offshore supply that directly benefits us in the way of royalties and taxation for our province, and indirectly through the employment that it creates, including for individuals who travel around the world in this particular sector.
We know that growth will be lower than was expected in the last budget projections. This has important implications for our currency and our fiscal situation. The good news is that real GDP growth resumed in the third quarter of 2015. The IMF, it its latest economic outlook released January 19, expects growth in Canada to pick up over the next two years in relation to 2015. We also maintain an enviable position of having a low debt-to-GDP ratio, abundant natural resources, and one of the most educated, intelligent workforces in the world.
Our policies will strike a balance between fiscal responsibility and controlled investments that promote economic growth. One of the most important components of this is restoring middle-class economic progress, which is, as we all know, the backbone of our economy and has been since our inception for close to 150 years now.
This is why one of the government's first orders of business back in December when we arrived was to table a notice of a ways and means motion to cut taxes for the middle class. This was the right thing to do for our economy. The proposed middle-class tax cut and accompanying proposals will help make the tax system fair so that all Canadians have the opportunity to succeed and prosper.
Specifically, Bill C-2 proposes, first, to reduce the second personal income tax rate to 20.5% from 22%; second, to introduce a 33% personal income tax rate on individual taxable income in excess of $200,000; and third, to return the tax-free savings account annual contribution limit to $5,500 from $10,000 and reinstate indexation of the TFSA annual contribution limit.
I will expand on the three points.
The first one is the reduction of the middle-income tax bracket, which is taking effect January 1. It is expected that about nine million Canadians will benefit from this measure in 2016. Single individuals will see an average tax reduction of $330 per year, and couples will see an average tax reduction of $540 per year.
Second, the government is introducing a new personal income tax rate of 33% that will apply to individual taxable income in excess of $200,000 per year. This means that only Canada's top income earners are expected to pay more tax as a result of the government's proposed changes to personal income tax rates. As with other bracket thresholds, the $200,000 threshold will be indexed to inflation.
Third, the government is returning the tax-free savings account annual contribution limit to $5,500 from $10,000, effective January 1, 2016.
These are some of the issues that we discussed during the campaign, including my colleague for Cape Breton—Canso. He was just here and talked incessantly about how wonderful his riding is and how hard it is for him to get around his large riding. He likes to talk about all these new policies we are bringing in to help the middle class in that beautiful area known as Cape Breton.
I can reassure members that the change to the TFSA is not retroactive. The TFSA annual contribution limit for 2015 will remain at $10,000. However, returning the TFSA annual contribution limit to $5,500 is consistent with the government's objective of making the tax system fairer and helping those who need it the most. When combined with other registered savings plans, which we are all familiar with, the $5,500 TFSA annual contribution limit will permit most individuals to meet their ongoing savings needs in a tax-efficient manner.
Indexation of the TFSA annual contribution limit will be reinstated so that the annual limit maintains its real value over time. This is referring to the consumer price index and how we will tie the limits to the increase in inflation.
Finally, before I conclude, I would like to highlight some of the other measures that are included in today's legislation, Bill C-2.
The bill proposes to change the current flat top rate of taxation rules applicable to trusts to a new rate of 33%, which is in line with the 33% tax rate as we proposed. The bill proposes to set the tax on split income to the new rate of 33%. It would amend the charitable donation tax credit to allow higher income donors to claim a 33% tax credit on the portion of donations made from income that is subject to the new 33% marginal tax rate. Finally, it would increase the special refundable tax and the related refund rate imposed on investment income of private corporations to reflect the proposed new 33% personal income tax rate.
Also, the government will introduce proposals in the upcoming budget to create a new Canada child benefit, which will take all of the benefits and put them into one tax-free Canada child benefit. This is something that has been talked about in my riding for quite some time. The biggest complaints were about benefits from government that suffered from tax clawbacks, which affected all benefits no matter what they were. We have now put forward this Canada child benefit that puts the tax aside for the sake of and benefit of our families. I look forward to the budget in the spring to talk about this.
Of course, nowadays there is an added pressure regarding things such as child care and child spending. Therefore, this is one of the proposals I look forward to in the upcoming budget that we talked about in the campaign, which Canadians overwhelmingly accepted as a way of financially helping themselves during their child-rearing years.
All these initiatives demonstrate that our sights are clearly set on the future. This legislation will help strengthen the middle class by putting more money in the pockets of Canadians to save, invest, and grow the economy. More broadly, it will help grow our economy in the context of a difficult global economic climate so that all Canadians benefit.
I heard some of the debate earlier, and I appreciate some of the concerns the opposition put forward. Of course, we have taken a strategic approach to provide a benefit to middle-class Canadians, especially those facing tough times.
To address these tough times in the future, I look forward to the budget, as I mentioned earlier, with things such as the Canada child benefit, which I think will enhance a way of life for those bringing up children now. For those who are suddenly unemployed, the situation is very difficult. As we deal with the situation in the next few months and certainly within the next few years, my colleagues, no matter what party they belong to, would certainly agree with me that we have challenging times ahead.
Again, for those provinces dependent on revenues from the oil and gas sector, and I speak of Alberta, Saskatchewan, and my own province of Newfoundland and Labrador, there are difficulties ahead, certainly when it comes to social programs. There will certainly be added pressure, but we believe that measures taken, such as those contained in BillC-2 and in the upcoming budget, will help to alleviate some of those concerns.
For the budget coming up, consultations are going ahead. I would advise all members to conduct consultations in their ridings, as I will. It is a perfect opportunity to get back to our ridings as members of Parliament. I am travelling to 15 communities in an area the size of Germany. I wish all members the best, because I know that travel can be very taxing on our families, but it is certainly worth it.
In my situation, I know what I will hear. I will hear a lot about the resource sector. I am going to hear a lot about the challenges that lie ahead but also about things like skilled trades and infrastructure spending to help spark the economy and to help communities deal with transit and their future investments.
I will leave it at that for now. I look forward to the questions and comments from my hon. colleagues.
