Review of tax breaks coming, says finance minister Morneau

OTTAWA — Finance Minister Bill Morneau says the Liberal government has only begun to clean up the tax code with his first federal budget and that a more detailed review is coming.

Morneau’s big-spending, big-borrowing blueprint has fiscal hawks complaining that spiralling debt, increased taxes or both will be the inevitable outcome of projected deficits in the $100-billion range over the next four years.

Last week’s budget, cheerily titled Growing the Middle Class, includes speculative nods to increasing revenues through tougher tax enforcement, particularly for high-income tax avoidance schemes. There’s also a hike in federal tax rates for Canadians earning more than $200,000 a year, more than offset by a tax cut for middle-income earners.

Overall federal revenues are forecast to fall slightly in 201617 compared with the current tax year that ends this Thursday.

“We’re going to embark on looking at the tax expenditures in the code and making sure they are all consistent with our approach to tax fairness,” Morneau told The Canadian Press in a roundtable interview.

“Tax expenditures,” for those unfamiliar with government parlance, are targeted tax breaks — in effect, spending by another name on specific, favoured groups.

Morneau pointed to the new Canada child benefit, coming July 1, which consolidates, boosts and re-targets four family benefits.

His first budget also eliminated popular Conservative “boutique” tax breaks for children’s arts and fitness, but added a new boutique credit for teachers who buy classroom supplies.

The Liberals announced last month that Dominic Barton, the head of international consulting giant McKinsey & Co., will head a new advisory council on economic growth. But the government has provided no hint as to how its tax study will be structured.

“We’ll move forward on a tax expenditure review and as we have more details on how we’re doing that, we’ll be transparent,” said Morneau.

If the Liberals really have the stomach for the first comprehensive look at Canada’s tax code in half a century, they’ll be cheered by a broad spectrum of tax analysts.

Budget 2016 provided mixed signals on disentangling a tax system that successive governments have loved to gum up with politically useful goodies.

ADRIAN WYLD/THE CANADIAN PRESS Minister of Finance Bill Morneau has promised to examine ‘tax expenditures’ — i.e. targeted tax breaks — and will be conducting a review of the tax code.