The Federal Government’s 2017–18 Budget gives Canadians a taste of what they might expect over the next couple of years: attempted efficiencies, closed tax loopholes, steady deficits, and a touch of caution. Budget 2017 outlines only $200 million in net new spending, but also an increase to the deficit of more than $5 billion for 2017–18, partly due to commitments from the previous budget, reduced revenues and increased general expenses.
The projected deficit for 2017–18 is $28.5 billion, declining to $18.8 billion by 2021–22 (including an annual $3 billion contingency fund). However, if the government’s strong growth scenario plays out, we could see a much smaller deficit between $5 and $8 billion by 2021. Instead of planning to eliminate the deficit as previously proposed, the government says it will maintain a balanced net debt-to-GDP ratio of around 31 per cent over the next five years.
There are no changes to corporate or personal income tax rates or the small business deduction threshold and no changes to capital gains taxation. In addition, the government did not address in the Budget a number of tax issues it has discussed since Budget 2016, indicating it will release more details on its plans to limit tax-planning strategies later this year. Concerns over potential changes to taxes, trade agreements and regulations in the United States have no doubt caused Canada’s Federal Government to reconsider its own tax strategy.
The Budget proposes to address a range of tax loopholes and inefficiencies, including: eliminating billed-basis accounting for certain professionals, preventing tax avoidance through straddle transactions, eliminating the tax deduction for home relocation loans, applying tax-avoidance rules to Registered Education Savings Plans (RESPs) and Registered Disability Savings Plans (RDSPs), eliminating the additional deduction for gifts of medicine, preventing Canadian life insurers from using foreign branches to avoid tax, repealing the tax exemption for insurers of farming and fishing property, and eliminating the Public Transit Tax Credit.
In order to advance the twin goals of reducing tax evasion and improving compliance, the government plans to give the Canada Revenue Agency an additional $523.9 million over the next five years. The government anticipates a five-fold return on its investment, hoping the CRA will recover $2.5 billion for its efforts.
We can expect to see more substantial proposals for change as the year progresses. The government has clearly signaled that it will be looking for additional ways to prevent tax avoidance.
Please click the link below for some detailed specifics on the announcements:
Kelly Ross is the founder and managing director of TPS Tax and Accounting and has 15 years experience in accounting and taxation. Kelly's experience includes working in multi-national CPA firms within various industries in Canada. Kelly has an Honours Bachelor of Commerce and is a member of CPA Canada. Kelly is considered an expert in her field and is a subject matter expert for Sheridan College and facilitates with both Sheridan and CPA Ontario.