Post Election – Tax Change Promises made by the Liberals

The Liberal Party of Canada is set to form a minority government, following the results of the federal election on October 21, 2019.  The Liberal Party made promises during the election campaign to introduce a variety of new tax changes that could significantly affect individuals and businesses in Canada. It’s possible that some of these pledges will now be modified before they are introduced. Specifically, the Liberal Party government may need to compromise with another federal party’s priorities to win the support required to get certain measures through Parliament and passed into law.

KPMG’s TaxNewsFlash-Canada summarizes the Liberal’s election tax platform to offer insight into potential tax changes that we may see as early as the end of 2019. In addition, they look at promises by the New Democratic Party of Canada and the Bloc Québécois, since these parties potentially hold a balance of power to get legislation passed in the new minority Parliament. 

Below are key highlights from the KMPG TaxNewsFlash. Lets see what they have promised that may affect your business. We posted some comments on the policy in italic.

1. Corporate Tax

Limit the amount of interest expenses deducted against net income. The Liberal propose that the amount of debt interests be limited to 30% of a corporations EBIDTA earnings. Interest can be carried back 3 years or forward 20 years. Tis will not apply to Canadian business with assets less than $10 million and less than $500,000 in active income.

Given that this is a minority government there appears that the NDP agrees with his measure while the other parties did not.

2. Corporate Tax Incentives

Corporate taxes will be cut by 50% for corporations that develop zero emission products that may include renewable electricity,  renewable fuels, zero emissions vehicles, battery technology, electric vehicle charging systems and net zero energy homes and buildings.

Anything that helps minimize climate change is a good thing, but how many of these companies are actually making money? How about financing help with higher tax credits for investors is better solution.

3. International Corporate Tax

International companies earning income in Canada will pay corporate tax on that income and will collect sales taxes on products sold. The tax would only apply to targeted advertising services and digital intermediation services where the worldwide revenues of the business are at least $1 billion and Canadian revenues are more than $40 million. 

The likelihood of this is happening is very high as their is complete agreement in principle in taxing these companies and  most likely targeted are the big three Amazon, Google and Facebook.

4. Personal Taxes

Raise the basic personal income tax deduction to $15,000 by gradually increasing the basic personal income tax amount between 2020 to 2023, and phasing out the increase in the basic personal amount for individuals with income above $150,605, completely eliminating the increase for individuals with income above $214,557 (using 2020 tax bracket amounts, indexed to inflation). 

The parties are over the map when it comes to personal taxes, but expect changes.

4. Sales Taxes

Introduce a new 10% tax on luxury cars, boats, and personal aircraft over $100,000 (excluding certain commercial uses) 

This look like another cash grab that overtaxes the wealthy.

To read additional info read this edition of TaxNewsFlash-Canada from KPMG Canada