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Excerpts From a Letter to the Minister of Finance of Canada

Révision de la lettre à la ministre des finances du Canada

Written by Brad Berry, CPA from Mowbrey Gil, for the Canadian Overview of Q1 2021. A newsletter published by Canadian member firms of Moore North America. This article about a Letter to the Minister of Finance of Canada is part of our mission to become partner of your success by keeping you informed of the news.

One of the most common questions put to tax professionals is, “What’s coming next?” Usually, this question is answered by a quip about crystal balls or some general theorizing about the current Government’s goals and the tools it may invoke to achieve them. However, on December 16, 2021, Prime Minister of Canada Justin Trudeau helpfully laid out his (and presumably the current Government’s) expectations of Minister the Honourable Chrystia Freeland and the Department of Finance. The full text of the letter can be found here.

 

Excerpts From a Letter to the Current Minister of Finance of Canada

The other tax geeks in the room will join me in jumping immediately to the tax policies outlined in the letter:

 

  • Raise the corporate income tax payable by banks and insurance companies that earn more than $1 billion and require them to pay a Canada Recovery Dividend;
  • Establish a minimum 15 per cent tax for top-bracket earners;
  • A tax on luxury cars, boats and planes;
  • Invest in the Canada Revenue Agency to pursue aggressive tax planning and avoidance;
  • Modernize the General Anti-Avoidance Rule (GAAR) regime to focus on economic substance; and,
  • Allow the immediate expensing of $1.5 million in annual capital expenditures on certain asset classes.

 

Proposed legislation released late on Friday, February 4, 2022 contained several changes that relate directly to these stated objectives, including, among other measures:

  • Enhancements to the Mandatory Disclosure Rules to capture more transactions and, if unreported, an extension of the normal reassessment period, and the automatic application of GAAR;
  • Enhanced beneficial ownership reporting for Trusts for year ends after December 30, 2022;
  • Interest deductibility restrictions aimed primarily at cross-border corporate structures, capping interest deductions at 30% of tax EBITDA; and,
  • The immediate expensing of capital property up to $1.5 million annually.

Apart from pure tax measures, much of the letter focused on means by which the Department of Finance could use a combination of tax credits and spending policies to further the social policies and initiatives of the government, such as:

  • Expanding diversity by incorporating into the department’s work “…the diverse views of Canadians”, including amendments to the Canada Business Corporations Act diversity requirements;
  • Combatting climate change through expanded tax credits and deductions for “green” energy, manufacturing, and appliance repair;
  • Supporting a “Fairness in Real Estate Action Plan”, including required reporting of pre- and post-renovation rent to deter “renovictions”, an anti-flipping tax, a vacant/underused housing tax, a ban on blind bidding, and a ban on foreign investment capital in non-recreational residential property for the next two years; and,
  • Several proposals regarding federally regulated financial institutions, including mandatory six-month mortgage payment deferrals for stressful life events, lowering of the criminal threshold for predatory interest rates, and a review of bank charges and required adjustments if they are deemed excessive.

While not quite a crystal ball, this letter provides an interesting glimpse into the minds of our current Government and how they intend to use fiscal policy to advance both their economic and social agenda.

 

Who is canada’s current minister of finance?

The Honourable Chrystia Freeland is the Deputy Prime Minister and Minister of Finance of Canada. In July 2013, Ms. Freeland was first elected as the Member of Parliament for Toronto Centre. She was then elected Member of Parliament for University-Rosedale in October 2015 and was re-elected in October 2019 and September 2021. Chrystian Freeland is Canada’s first woman in charge of the Ministry of Finance.

Mowbrey Gil Tax Minute with Brad Berry, CPA

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