Significant Draft Tax Legislation Released on August 4

Evelyn Jacks

No rest for tax and financial professionals, it seems.  Between two long weekends, August 4 and September 8 a giant package of draft tax legislation (365 pages) and explanatory notes (459 pages) must be read, deciphered and reviewed to provide commentary.  It’s a very tight window considering the significance of the provisions, which reform the tax system for employees, employers, high income earners, those embarking on intergenerational transfers, investors in the clean economy and mineral exploration and those who try to circumvent the intent of the law.

 We’ll overview these measures in more detail at the upcoming September 20 CE Summits. Please register by September 15 to take advantage of early registration savings. 

The full list of provisions were highlighted in a release by Finance Canada:

Income and Excise Tax Matters

• Alternative Minimum Tax for High-Income Individuals;
• Employee Matters:  Employee Ownership Trusts and Registered Compensation Arrangements;
• Flow-Through Shares and the Critical Mineral Exploration Tax Credit – Lithium from Brines.
• General Anti-Avoidance Rule Changes
• Intergenerational Business Transfer Framework
• Investment Tax Credits
  • Carbon Capture, Utilization and Storage (CCUS) Investment Tax Credit;
  • Clean Technology Investment Tax Credit;
  • Labour Requirements Related to Certain Investment Tax Credits;
• Reduced Tax Rates for Zero-Emission Technology Manufacturers

• Tax on Repurchases of Equity, including share buybacks; and
• Proposed amendments to implement technical tax amendments in order to improve the certainty and integrity of the tax system
• Tax Treatment for Credit Unions

Global Economy Issues

• Global Minimum Tax (Pillar Two): the draft legislation being released today will be updated as necessary to reflect elements of the administrative guidance (including on the treatment of transferable and other tax credits) released this summer by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting not already included in legislative proposals; and,
• Digital Services Tax: to ensure tax fairness for Canadian businesses competing in the global economy and in the absence of any firm and binding multilateral timeline to implement Pillar One, the government is publishing revised draft legislation, first released for comment in December 2021.

Sales and Excise Tax Measures

• Technical amendments to GST/HST rules for financial institutions;
• Enhancements to the vaping product taxation framework; and,
• Tax-exempt sales of motive fuels for export.

Previously Announced Measures

• Excessive Interest and Financing Expenses Limitations (EIFEL);
• Extending the quarterly duty remittance option to all licensed cannabis producers; and,
• Revised Luxury Tax draft regulations to provide greater clarity on the tax treatment of luxury items.

Bottom Line: Those who wish to provide commentary on this extensive package of significant tax change will need to free up time to read, interpret and analyze the implications to individual taxpayers, businesses large and small  and the economic and investment landscape as a whole in Canada, and submit them on or before September 8.  It’s a tall mid-summer order, but an important one, if you disagree with the direction of these policies.