Thursday, March 23, 2017
The tax measures contained in Canadian Finance Minister Bill Morneau's second Budget are focused on closing loopholes, cracking down on tax evasion and improving tax reliefs for the "middle class."
Morneau delivered the Budget on March 22. In his Budget speech, he said: "Going forward, we will close loopholes that result in unfair tax advantages for some at the expense of others. We will eliminate inefficient tax measures, especially those that disproportionately benefit the wealthy. And we will work with the provinces and territories to crack down on those who hide their identity to avoid paying taxes."
According to Budget documents, the Government intends to take the following actions to close loopholes in the tax system:
The Government will also further review the use of tax planning strategies involving private corporations that inappropriately reduce the personal taxes of high-income earners. The Government will at the same time consider whether there are features of the current income tax system that have an inappropriate, adverse impact on genuine business transactions involving family members.
The Government will release a paper in the coming months that will set out the nature of these issues in more detail, along with a range of proposed policy responses.
In addition, the Budget will invest an extra CAD523.9m (USD393m) over five years in activities designed to prevent tax evasion and improve tax compliance. The funding will enable the Canada Revenue Agency to: increase its verification activities; hire additional auditors and specialists with a focus on the underground economy; develop robust business intelligence infrastructure and risk assessment systems to target high-risk international tax and abusive tax avoidance cases; and improve the quality of investigative work that targets criminal tax evaders.
The Government expects to raise CAD2.5bn from the anti-evasion measures outlined in the Budget.
The federal Government will collaborate with the provinces and territories on a national strategy "to strengthen the transparency of legal persons and legal arrangements and improve the availability of beneficial ownership information." It is also currently examining how the tax reporting requirements for trusts can be enhanced, to improve the collection of beneficial ownership information.
Another key tax-related focus of the Budget is the elimination of tax measures that have a limited impact, have had low take-up, or duplicate other forms of federal support. The Budget proposes to:
To improve consistency across the tax system, the Budget also proposes to eliminate the deduction in respect of employee home relocation loans, and remove the tax exemptions for non-accountable expense allowances paid to members of provincial and territorial legislative assemblies and to certain municipal office-holders.
With a view to updating the tax system to reflect the changing nature of the economy, the Budget will:
On the personal tax front, the Budget proposes the following changes to the tax credit system: