2021 Federal Election: A comparison of the parties’ tax proposals
On Aug. 15, 2021, Canada’s Prime Minister, Justin Trudeau, called a snap election sending Canadians to the polls with only 36 days to decide their vote. With the country still grappling with COVID, the parties’ platforms focus on pandemic recovery and restarting the economy.
All the parties in this election are offering up a myriad of tax proposals to win Canadians’ votes on Sept. 20, 2021. We have summarized these proposals below.
Liberal Party of Canada
Building on the 2021 Federal Budget released by the current Liberal government, the Liberal platform focuses on continuing its COVID relief and implementing measures to help Canadians achieve home ownership and to combat tax avoidance by targeting high income earners, large companies as well as certain non-resident investors.
- Introduce a minimum effective tax rate of 15% for individuals with taxable income above the threshold for the top bracket ($222,661 for 2022). The minimum tax will be calculated as 15% of taxable income and will replace the net federal tax where net federal tax is lower than the minimum tax. This measure is intended to remove the ability to artificially pay no tax through excessive use of deductions and credits. Foreign income taxes paid will be used to reduce the minimum tax payable, based on the share of foreign income in net income, to avoid double-taxation of income.
- Double the First-Time Home Buyers Tax Credit from $5,000 to $10,000. The Liberals are also proposing a Registered Home Savings Plan to allow Canadians under 40 to save up to $40,000 and make tax-free withdrawals from the savings account, and unlike the current Homebuyer’s Plan, there would be no need to repay the funds after the home is purchased. As the amounts contributed reduce individuals’ RRSP contribution limits, the funds in the savings account will convert to an RRSP where a home is not purchased before the age of 40.
- Introduce an anti-flipping measure on residential properties to require owners to hold property for at least 12 months. Specifically, the Liberals propose to remove access to the principal residence exemption when a property is sold within 12 months of purchase, excluding specified changes in life circumstances such as job loss or illness, among others.
- Introduce a Career Extension Tax Credit for seniors choosing to work past age 65 and expand the Canada Workers Benefit, as well as introduce a Labour Mobility Tax Credit.
- Introduce a new EI benefit for self-employed Canadians and establish an EI Career insurance benefit.
- Increase the Eligible Educator School Supply Tax Credit from 15% to 25% and extend the existing Home Office Expense deduction for an additional two years.
- Provide $10 per day childcare across Canada.
- Change the Canada Caregiver Credit into a refundable, tax-free benefit of $1,250 that will be indexed to inflation.
- In addition to providing grants and loans for home retrofits, and doubling the Home Accessibility Tax Credit from $10,000 to $20,000, the Liberals will introduce a new 15% tax credit to cover the cost of home appliance repairs and a new multigenerational home renovation tax credit of 15% up to $50,000.
- Introduce a corporate surtax of 3% on all bank and insurance company earnings in excess of $1 billion. The same companies would also be required to pay a special fee called a ‘Canada recovery dividend’ over a four-year period beginning in the 2022 to 2023 fiscal year.
- Extend the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy (CERS) past October 2021 for businesses in the tourism sector experiencing a minimum 40% revenue loss. The subsidy rate will be up to 75%, commensurate to their revenue loss, in order to help cover fixed costs like wages and rent between September 2021 until May 31, 2022. The Liberals also propose to extend the Canada Recovery Hiring Program, announced in the 2021 Federal Budget, until March 31, 2022.
- Increase the maximum loan amount for the Canada Small Business Financing Program and implement the Canada Digital Adoption Program.
- Review the tax treatment of large corporate owners of residential properties (e.g. Real Estate Investment Trusts).
- Provide small businesses with a tax credit of 25% for eligible ventilation improvement expenses and develop an investment tax credit of up to 30% for clean technologies.
- Eliminate flow through shares for oil, gas and coal projects, double the Mineral Exploration Tax Credit and extend the Canadian Film or Video Production Tax Credit.
- Provide healthcare professionals with a one-time tax incentive to establish a practice.
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Source: RSM Canada LLP
Used with permission as a member of RSM Canada Alliance
2021 Federal Election: A comparison of the parties’ tax proposals
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The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.