Speak Up: The Government Wants to Know Your Priorities for the Next Federal Budget

The federal government is asking for your opinion in advance of the upcoming federal budget. Four priorities have been brought forward for your consideration, and you can submit your feedback electronically.  But, is much of the agenda already set?

These priorities were prefaced in the Throne Speech:

• Strengthening the middle class and growing the economy
• Fighting and preparing for climate change and protecting the environment
• Keeping Canadians safe and healthy
• Continuing the work towards reconciliation with Indigenous Peoples

You can provide your opinion and feedback to speak to these issues by completing a survey online or by sending an email to budget2020@canada.ca.

However, it’s also useful to consider the election platform delivered by the Liberal Party in anticipation of what may be on the horizon for this budget, the date of which has not yet been announced.

In terms of economic forecasts, continued deficit spending was projected over the next four years, as noted below. The net debt-to-GDP ratio, currently at 30.9% is expected to drop to 30.2% over the period, which the party says makes the planned deficit projections affordable, based on projected ability to repay debt.

The government also has promised to undertake a new comprehensive review of government spending and in particular, tax expenditures (known as tax deductions, credits and preferences to the taxpayer).  The object is to ensure that wealthy Canadians do not benefit from “unfair tax breaks”, according to the platform.  A similar review was committed to in 2015, which lead the government to identify more than $3 billion a year in tax hikes. Here is how the new plan was projected to look:

The question that many have one their minds is whether capital gains inclusion rates will rise; in particular as part of the wealth transfer process.  A minority government must seek the cooperation of the NDP, which suggested a 75% income inclusion rate in their platform. This could make the disposition of assets in future years significantly more expensive.

Assets that attract capital gains income inclusion, are currently required to add 50% of the total capital gain to income. Examples of such assets include:

1. Qualified small business corporation shares
2. Qualified farm or fishing property
3. Publicly traded shares, mutual fund units, other shares
4. Bonds, debentures, promissory notes
5. Real estate (but not principal residence dispositions at this time)
6. Mortgage foreclosures and conditional sales repossessions
7. Depreciable property
8. Personal use property and
9. Listed personal use property

Tax professionals and financial advisors should be prepared to discuss the definition of these assets with their clients and whether there are any accrued gains in them in developing personal and family net worth statements during tax filing time.

Additional educational resources:  The CE Summits Advanced Tax Update Journal – get your copy of this comprehensive tax filing guide for the 2019 T1 Return. Call 1.866.953.4769 to purchase.

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