Re-elected Government’s Agenda for Tax

Canada's political parties made numerous tax promises during their federal election campaigns this year. Find out what tax changes for businesses and some international measures might be coming now that the election is over and the government has been re-elected.

The Liberal Party's 2021 campaign platform contains more than 30 potential tax measures, some of which have already been disclosed but the majority of which are new. As laid out in campaign materials and news releases, to help you understand what tax changes you might face in the coming months, in Budget 2022, or after, this blog provides an overview of the government's objectives in businesses tax measures and international tax measures.

Keep in mind that some of these proposed modifications may not be implemented, while others may be significantly altered before being implemented. In most situations, more data is required to determine how the measures would work in practice. Some of the suggestions were originally revealed in the federal budget for 2021; for a summary of these adjustments, see CPA Canada’s? 2021 Federal Budget Tax Highlights.

TAX MEASURES FOR BUSINESSES

Other government promises related to corporate income and business taxes include the following:

Increase taxes for banks and insurance companies

Corporate income tax rates on banks and insurance companies with income exceeding $1 billion per year would be increased to 18 % (from 15 %). These companies would also pay a temporary Canada Recovery Dividend.

Tax rules for landlords

Landlords would be required to disclose on their tax returns the rent they receive before and after renovations. A surtax would apply if the rent increase was excessive.

Tax treatment of large corporate owners of residential properties

The government intends to review the tax treatment of large corporate owners of residential properties such as real estate investment trusts.

Flow-through shares

The current flow-through share tax rules that apply to oil, gas, and coal projects will be eliminated.

Scientific Research and Experimental Development (SRED) Program

The SRED program will be reformed in order to reduce red tape and better align eligible expenses with current innovation practices.

Business investment tax credits

Commitments for new and amended tax credits for business investment include:

• introducing new investment tax credits for a range of renewable energy and battery storage solutions
• doubling the Mineral Exploration Tax Credit for materials on the Canadian list of critical minerals
• developing an investment tax credit of up to 30 % for a range of clean technologies, including low-carbon and net-zero technologies

INTERNATIONAL MEASURES

Some potential tax measures have an international focus. These include:

General anti-avoidance rule

The government remains committed to modernizing the general anti-avoidance rule by focusing on economic substance and by restricting the ability of federally regulated entities, including financial institutions, to use tiered structures as a form of corporate tax planning that flows Canadian-derived profit through entities in low-tax jurisdictions in order to reduce taxes back in Canada.

Global corporate minimum tax

The government has reconfirmed that it will work with international partners to implement a global corporate minimum tax.

Tax on vacant land

The government plans to extend the tax on non-resident, non-Canadian owners of vacant, underused housing, which takes effect on January 1, 2022, to also cover foreign-owned vacant land within large urban areas.

With this full tax agenda, we can expect the re-elected federal government to make a number of announcements in the months to come and particularly in Budget 2022. Visit IDM Professional Corporation CPA for the latest on this and other tax topics.