“I sense a reluctance to raise the top rates any further because capital is mobile – it’s leaving the country,” said Carol Sadler, founder and tax manager at Achen Henderson LLP in Calgary, adding that she doesn’t expect not to increase tax rates. nor for middle-income people.
Growing concerns about the effects of inflation “would certainly make any introduction of new personal tax measures a little surprising at this point,” said Joseph Micallef, partner and national financial services leader at KPMG in Toronto.
And with the Department of Finance busy implementing several previously announced initiatives, “I can’t imagine the Department of Finance having the bandwidth for many major changes this year,” said Jamie Golombek, chief executive of tax and estate planning at CIBC Private Wealth Management. in Toronto.
Instead, the 2022 budget will likely focus on jobs, economic growth and greening the economy, said Elliot Hughes, senior adviser at Ottawa-based Summa Strategies Canada Inc.
“You’re going to see more housing from the federal government, and I think you’re going to see a lot of talk and action and money being put into this climate transition idea,” said Hughes, who served as deputy director tax policy under former finance minister Bill Morneau.
Earlier this month, the government introduced legislation and launched consultations to implement a host of proposals from previous budgets.
The 2021 Liberal campaign platform promised to help Canadians find affordable housing. Pledges included doubling the first-time homebuyer tax credit from $5,000 to $10,000 and introducing the first Home Ownership Savings Account (FHSA), which would include contributions and withdrawals tax-free to help Canadians under 40 save up to $40,000 for a first home.
“I expect them to work out the details [regarding FHSA rules] within budget, although I don’t think [the plan] will be in effect until 2023,” Golombek said.
The Liberals also promised to introduce tax-related initiatives to ‘chill excessive price growth’ in housing, including requiring homes to be owned for at least 12 months in order to access the residency exemption. main.
Mark Chan, vice president of wealth planning at Gluskin Sheff + Associates in Toronto, said the government could take longer to review the structure of the tax, although he said it would be effective for 2022 .
“It’s a very gray area as to whether you’re actually flipping a house versus whether it’s a primary residence,” Chan said. Current Income Tax Act rules require home swimmers to report property sales as business income, he pointed out. “[The anti-flipping proposal] needs to be discussed a bit further, given the complexity.
In December, the government introduced legislation to impose a 1% annual tax on the value of vacant or underutilized residential properties owned by non-Canadian non-residents, which had been promised in the 2021 budget. This piece of legislation, Bill C-8, passed second reading on 10 February and is currently being examined in committee.
In the next budget, the government could move forward with other initiatives aimed at reducing overall home prices, including revising the tax treatment of REITs and down payment requirements for investment properties. , both of which were directives included in Prime Minister Justin Trudeau’s mandate letter to Finance. Minister and Deputy Premier Chrystia Freeland.
“They are considering action to crack down on real estate investors,” said Carol Bezaire, senior vice president of tax, estates and strategic philanthropy at Mackenzie Investments in Toronto. Bezaire suggested that the government could rule out home equity lines of credit as a source of financing for a down payment on a rental property, for example.
“As an advisor, if you know you have clients who are investing in rental property, stay tuned because they may not be able to continue doing so. [in the same way]said Bézaire.
The government said in the 2021 fall economic update that a bill and details of the promised luxury tax on cars, boats and planes would be released this year.
Other tax promises can also be addressed in the budget.
Golombek said he believes the next budget will address concerns over the surprise passage last year of Bill C-208, which allows intergenerational transfers of farms and fishing companies between family members. . The government argues the legislation contains loopholes, such as allowing “excess stripping” of capital gains dividends to take advantage of lower tax rates.
Proposals to address Bill C-208 could be part of a larger set of proposals, Golombek said: “We know the government has been trying for years to eliminate excess strip transactions. [more broadly].”
The government has also promised a minimum tax of 15% for high earners. However, “no one really understands [that proposal] because there is already an alternative minimum tax,” Golombek said. “It remains to be seen how [the proposed tax] will be different and what will really be after.
Mahmood Nanji, a fellow at the Lawrence National Center for Policy and Management at Western University’s Ivey Business School in London, Ont., said he expects the government to move forward with the proposal. 15% minimum tax in budget: “It’s about tax fairness; it is the one that most Canadians will support.
Nanji, a former associate deputy minister at Ontario’s Ministry of Finance, said he also suspects the government is moving forward with a 3% surtax on bank and insurer revenues over $100,000. a billion dollars and have these companies contribute to a dividend fund for the recovery of Canada. However, he said the federal government could eventually water down the proposals or delay them.
“They’re definitely not going to drop anything drastic when they release their budget, which will kind of hurt banks and insurers, because there’s going to be a big backlash,” Nanji said. “But I have a feeling they won’t ignore [the proposals] That is.”
Nanji said he would prefer the government to consider more ambitious ways to foster growth and tackle the deficit, such as raising the GST rate, targeting the tax gap created by the underground economy and launching a long overdue review of Canada’s tax system.
“You can’t tax the way you taxed in the 1960s,” Nanji said. “If we do nothing [on tax competitiveness]we’re going to lose a lot of knowledge workers.
Still, Hughes said the government is more likely to take more targeted action to foster economic growth and boost productivity. For example, last year’s campaign included promises to introduce a career extension tax credit, a labor mobility tax credit and a renovation of multi-generational homes, and to double the tax credit for home accessibility.
“The wider shock [economic] system that the pandemic has had is immense,” Hughes said. “Not everything will be dealt with and resolved in a single budget.”
The 2022 budget is expected to be tabled in late March or early April. The government’s pre-budget consultations end Friday.