Budgetary shock treatment to replenish public coffers and protect future generations
Without government support, many businesses and organizations would not have survived the recent public health crisis. Since it is clear that government relief programs must be maintained, in particular through more targeted actions and direct assistance, it is equally clear that the governments of Canada and Quebec urgently need to introduce measures aimed at reducing pandemic-related debt.
Raymond Chabot Grant Thornton is proposing a series of bold measures, including some temporary ones, that would help both levels of government achieve this goal.
– Emilio B. Imbriglio, President and CEO
Montreal, February 15, 2021 – The pandemic has led to extraordinary levels of debt that can only be addressed with exceptional budgetary measures. To this end, Raymond Chabot Grant Thornton is presenting its prebudget recommendations to the Finance Ministers of Quebec and Canada.
The firm’s prebudget recommendations are divided into two sections. The first describes strategies to replenish government coffers—without raising taxes—as a means of preventing a public finance crisis, which would be particularly detrimental to future generations. The second proposes federal and provincial measures aimed at helping businesses recover.
“Raymond Chabot Grant Thornton believes that strong and sustainable measures are needed to support the recovery and growth of Canadian businesses, which are the backbone of our economy. We also believe that future generations should not have to shoulder the burden of excessive public debt. With these two priorities in mind, the firm is urging the governments of Canada and Quebec to implement bold, high-impact measures leading to a temporary increase in revenue inflows and savings over the short term. These funds will help offset the substantial deficit caused by the pandemic. We know that some of our proposed measures are ambitious and will spark debate. However, we also know that drastic action is needed to protect future generations. Let’s take action today for a better tomorrow!” said Emilio B. Imbriglio, President and Chief Executive Officer at Raymond Chabot Grant Thornton.
The firm is recommending the following measures, of which the first four would only be implemented on a temporary basis, to increase government revenue and offset pandemic-related debt:
1. The federal and Quebec governments should allow taxpayers to elect to withdraw funds from their registered retirement savings plan (RRSP) over the next 24 months, and pay a reduced tax rate of 7.5% (fixed rate) on these funds.
2. The federal and provincial governments should allow taxpayers to elect to withdraw funds from their holding corporations over the next 24 months and pay a reduced tax rate of 10% (fixed rate) on dividends.
3. The federal and Quebec governments should allow taxpayers to elect, within the next 24 months, to immediately pay capital gains tax on assets that have appreciated in value. Taxpayers making this election would benefit from a reduced tax rate of 7.5% (fixed rate) on their taxable capital gains.
4. The federal and Quebec governments should allow taxpayers to elect, within the next 24 months, to immediately pay two years of tax instalments. Taxpayers making this election within the specified time frame would be credited an amount equivalent to an as-yet-undetermined percentage of their instalment amount (e.g., 5% or 10%), to be applied against income tax owing two years after the instalment was made.
5. The federal and Quebec governments should allow Canadian and Quebec corporations to increase their capital dividend account (CDA) to 30% of expenses incurred on initiatives that benefit the health of their employees. Corporations could therefore pay tax-free dividends to their shareholders in Canada and Quebec amounting to 30% of these eligible expenses.
6. The federal and Quebec governments should, going forward, focus on providing targeted financial support, especially in the form of direct assistance (subsidies), to the hardest-hit sectors so as not to compromise their ability to recover and grow.
7. The Quebec government should speed up efforts to reintroduce its Immigrant Investor Program and implement favourable conditions leading to the provincial economy receiving an injection of hundreds of millions of dollars from abroad.
8. The federal government should reopen the Immigrant Investor Program, though under a new form.
The firm is recommending the following more general measures to stimulate business recovery and growth:
9. The Quebec government should introduce an entrepreneurial wellness program under which SME leaders could receive assistance from external professionals in two key areas: personal life (psychological support) and work life (business support).
10. The Quebec government should review the Act respecting contracting by public bodies and, in many cases, cease using the lowest compliant price as the main criterion when assessing bids. Instead, it should give priority to the best overall value for the project based on a predetermined set of criteria that include, among other things, the bidder’s expertise, use of innovative techniques, execution quality and solution durability.
11. The federal government should act quickly to amend the Income Tax Act to make the transfer of a business to a family member fair for all businesses, regardless of their size or economic sector. The federal government should also come to an agreement with the Quebec government, in the very short term, to harmonize tax laws on family business succession.
12. The federal government should create an innovation tax credit to help SMEs increase their technology investments, restart their operations more efficiently and pursue growth.
Raymond Chabot Grant Thornton is also making the following recommendations to the Government of Canada:
13. In order to return to a balanced budget, the federal government should distinguish pre-pandemic debt from debt incurred since the crisis began in a defined strategy aimed at consolidating public finances.
14. In light of the exceptional deficit and debt resulting from its pandemic response measures, the federal government should establish specific targets that lead to a balanced budget in the medium term.
The prebudget proposal submitted to the Quebec government is available here (in French, with a summary of the recommendations in English). The proposal for the Canadian government is available here (in French, with a summary of the recommendations in English)
About Raymond Chabot Grant Thornton
Raymond Chabot Grant Thornton is a professional services firm that has been dedicated to the success of organizations and their leaders since 1948. The firm’s advisors are committed to helping clients thrive by obtaining a deep understanding of what is important to them, their business and their industry. This knowledge, combined with a team of motivated and talented professionals, helps accelerate growth. A Quebec and Canadian leader in the areas of assurance, tax, advisory services and business recovery and reorganization, Raymond Chabot Grant Thornton boasts more than 2,700 professionals, including approximately 200 partners, working in over 100 offices across the province of Quebec and in the Ottawa and Edmundston regions.
Together with Grant Thornton LLP, another Canadian firm, and the Grant Thornton global organization, our global footprint spans across more than 140 countries with over 58,200 people who provide real insight, a fresh perspective and agility to keep clients moving ahead.
Source:
Francis Letendre
Head, Public Affairs
Raymond Chabot Grant Thornton
514-390-4201
[email protected]
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Bill 42, introducing a new mandatory disclosure mechanism for nominee agreements in Québec1 received assent on September 24, 2020.
As a result, nominee agreements entered into in the context of a transaction involving tax consequences must now be disclosed to Revenu Québec, in the form and manner prescribed for that purpose.
Nominee agreements entered into before September 24, 2020 must be disclosed by December 23, 2020, i.e. 90 days after Bill 42 received assent.
Failure to comply with the new disclosure requirement will result in penalties up to $5,000, as well as the suspension of the limitation period on assessments.
Filing deadlines
Nominee agreements entered into after May 16, 2019 must be disclosed to Revenu Québec on the later of the following dates:
Nominee agreements must be disclosed by December 23, 2020.
- The 90th day following the conclusion of the nominee agreement; or
- December 23, 2020, i.e.the 90th day following the day Bill 42 received assent.
Parties to such an agreement entered into before May 17, 2019 are also required to file a disclosure by these deadlines at the latest, to the extent that the tax consequences of the transaction or series of transactions in respect of which the agreement relates continue after May 16, 2019.
If you are a member of a partnership that is party to such an agreement, you are also subject to the disclosure requirement.
Disclosure requirement
The disclosure must be made through a Form TP-1079.PN-V, sent under separate cover by registered mail. It shall include all information required therein, including the following:
- The date the nominee agreement was entered into;
- The identity of the parties to the nominee agreement;
- A full and sufficiently detailed description of the facts of the transaction or series of transactions to which the nominee agreement relates and the identity of any person or entity for which such transaction or series of transactions has tax consequences.
Do not hesitate to contact your Raymond Chabot Grant Thornton advisor who can help you determine which measures apply to your situation and assist you with the steps needed to comply with them.
1As announced by the Québec Ministry of Finance in Information Bulletin 2019-5 released on May 17, 2019.