Tax planning strategies may be targeted
TORONTO • Canadians shouldn’t assume that the lack of major tax hikes in Budget 2017 means no big changes are coming, Finance Minister Bill Morneau said Friday.
Morneau was in Toronto to promote the federal government’s new budget through a lunch-hour speech to a Bay Street crowd, and it wasn’t lost on the minister that many in the audience are high- i ncome earning professionals working in the financial sector.
“Last year, we asked some of you to pay more in tax, so that we could cut taxes for the middle class,” Morneau said.
Prior to this week, there were fears that Budget 2017 would introduce measures that would demand the rich pay even more. The budget document that emerged on Wednesday talked about “tax fairness” and arguably focused more on smallersized tweaks to the system than a major overhaul.
Speaking to reporters after the speech, Morneau said the government is in the midst of a wide- ranging review that aims to reduce what the budget document describes as “tax benefits that unfairly help the wealthiest Canadians rather than the middle class and those working hard to join it.”
The government is concerned with tax planning strategies in which individuals use private corporations as a means to reduce their personal tax burdens.
In so-called“income sprinkling ,” a business owner might distribute profits from the corporation to close family members in lower tax brackets. The government is also studying whether individuals are using corporations to hold what are really personal investment portfolios, and are benefiting from payout strategies in which income is distributed as capital gains, which are taxed at a lower rates.
But if you want a hint on what will come of that study, you’ll have to wait, the minister said. “We have an- nounced the measures that we want to announce right now,” Morneau said when asked to elaborate on the government’s intentions.
“There will be a paper that will be coming out in the near term. I can’t tell you the exact date, but it won’t be that long, to explain where we see the issues, how we intend on approaching those, seeking input, and we will move expeditiously in considering how we can implement,” he said. “Our paper will provide more insights into that.”
Morneau also noted Canada’s official acceptance, announced Thursday, as a member of the Asian Infrastructure Investment Bank. The government had announced in Budget 2017 that it would pay $ 256 million over five years to acquire shares in the bank.
“The AIIB will help sustain growth in Asia and represents an opportunity for Canada to further engage in multilateral development efforts that support inclusive economic growth in Asia and beyond.”