Homeowners in line for 15% rebate on renos

Janice Tibbetts, Canwest News Service/National Post Published: Tuesday, January 27, 2009

OTTAWA -- Canadians who want to sod their lawns or renovate their bathrooms will get a tax break worth up to $1,350 as a key plank of the government's effort to inspire spending.

For a certain sector of consumers, 2009 could become the year of the reno, following the announcement Tuesday of a Home Renovation Tax Credit Tax Credit that lets taxpayers claim 15% of their fixups until Feb. 1, 2010.

"The HRTC will provide a temporary incentive for Canadians to undertake new renovation projects or accelerate planned future projects," the budget documents said, "thus providing timely stimulus to the Canadian economy while boosting energy efficiency and the value of Canada's housing stock."

The government said the incentive is expected to provide about $3-billion in tax relief to some 4.6 million families.

The credit, which is available for homes and cottages effective immediately, is designed to boost construction, forestry and other industries.

Taxpayers can claim renovations on their 2009 tax returns on costs over $1,000, but not exceeding $10,000.

The home renovation program would appear to involve considerably less red tape than some existing initiatives that encourage investment in the home. Programs that involve rebates for investment in the energy efficiency of a house, for example, require a government auditor to approve the changes made to a home to ensure energy efficiencies have been realized.

The HRTC, however, simply requires homeowners to apply for the tax credit, directly on their income-tax returns. The only demand is that the taxpayer save the appropriate receipts in case of a future audit by Revenue Canada.

It also, though, means contractors will have to produce invoices for jobs such as backyard landscaping or basement refinishing -- work that Finance officials yesterday noted is often conducted on a cash basis, with no paperwork produced.

The list of eligible expenses includes renovating kitchens, bathrooms or basements; new carpeting or flooring; building additions, decks, or retaining walls; installing furnaces or water heaters; interior and exterior painting; or driveway resurfacing.

Routine maintenance does not qualify. Such things as new furniture, appliances, tools, carpet cleaning and snow removal are excluded.

Also on the home front, the government will put an extra $300-million over two years into energy retrofits, raise to $25,000 the amount first-time homebuyers can borrow from RRSPs, and provide up to $750 in tax relief to help with their purchases.

Bankers fight to keep card rates up

Issuers battle behind the scenes to influence buget

Eoin Callan, Financial Post Published: Monday, January 26, 2009

Bank lobbyists are fighting a rear-guard action to dissuade the government from taking aim at high credit card interest rates and fees in tomorrow's federal budget.

Bankers were cautioned about a week ago the Conservatives were considering tackling concerns raised by consumer and small businesses groups about price gouging.

The warning reflects political sensitivity to criticism of the banking sector that has surfaced during public consultations and constituency-level soundings after state intervention to support the financial system.

As Ottawa prepares fresh measures to bolster credit markets, stimulate investor demand, and bail out industry, it is mindful of the growing potential for a backlash as Canadians wrestle with their own personal debt loads.

But industry lobbyists are aggressively opposing any meddling in the complex mechanisms they use to set rates and transaction fees for credit cards, a profitable business line that the government currently has no authority to scrutinize or regulate.

"When you have a banking system that has performed so well in the midst of a global crisis, perhaps better than any in the world, why would you burden it with a new extra layer of regulation?" asked one person in the industry.

The banking lobby has successfully faced down past efforts to regulate credit card rates or to force disclosure of how fees and prices are set.

But the issue has gained fresh momentum since retailers reacted angrily to a sudden increase in the fees collected from merchants by banks each time they process a Visa or Mastercard payment, which the Retail Council says cost Canadians a total of $4.5-billion in "hidden fees" last year.

Jack Layton, leader of the New Democratic Party, said the credit squeeze had put many retailers and small businesses in a position where excessive rates and fees could have a material adverse impact on the future of their enterprise.

"We favour stronger regulations to prevent banks from charging unfair credit card interest rates and transaction fees," Mr. Layton said.

In the Senate, influential Liberals on the banking committee are also rattling their sabres, though it would likely take the weight of House of Commons to overcome entrenched industry opposition to the status quo.

The simplest first step for Jim Flaherty, the Finance Minister, to take if he chose to tackle concerns over credit cards would be to mandate the finance committee to hold hearings.

The initial goal would likely be to conduct an audit and compel the banks to disclose their costs, revenues and profit margins on credit card services, information they have long refused to share.

But bankers and lobbyists have been arguing any foray into an area of their business currently beyond the reach of the federal government presages an attempt to increase the burden of regulation.

Yet reflexive arguments against new regulation are losing some of their political force as the global financial crisis prompts deeper examination of the different functions banks fulfil in the economy.

Credit cards are an example of a commercial enterprise that also doubles as basic service, according to Duff Conacher, chairman of the Canadian Community Reinvestment Coalition.

"There are a lot of things you cannot do without a credit card any more. You can't really travel -- book a flight, rent a car, or stay in a hotel -- without one," he says.

That, he argues, makes the profit margins on the services a matter of public interest.

Mr. Conacher says one example of an industry practice that is unlikely to stand up under scrutiny is banks charging interest on 100% of a monthly credit card balance after most of the loan has been paid off.

"Let's say you go into a branch thinking you owe about $1,020, and make a payment of $1,022, but actually you owe $1,023. Then because you still owe $1, they will keep charging you interest on the original principal -- $1023 -- even though you've paid off more than 99.9% and only owe $1.

It doesn't work that way with most loans, so why credit cards?" he asks.