MONTRÉAL, March 29, 2012 – True to its tradition, Raymond Chabot Grant Thornton releases its post-budgetary bulletin providing an overview of the tax measures that will affect individuals and businesses in the coming years.
“We are very proud to release this document, prepared by a team of tax specialists in the lock-up, which provides a broad view of the main tax measures in the budget tabled today by Canadian Finance Minister, the Honourable James M. Flaherty,” stated Jean Gauthier, Partner and National Tax Director. The summary may be viewed at the following address: www.rcgt.com/en/2012-federal-budget.
Direct innovation support encouraged but SR&ED tax credits cut back
While Canada expects modest growth in the short term, the government has chosen to support business and entrepreneurs directly by encouraging innovation and prosperity. According to Michel Lefebvre, Tax Partner and member of the Scientific Research and Experimental Development (SR&ED) Program, “Investing in innovation is always a wise choice, however, it might have been wiser not to cut into the corporate tax credits provided under the federal government’s significant SR&ED program.”
To support research, innovation and entrepreneurship, the federal government’s 2012 economic action plan will provide $1.1 billion over five years in direct research and development support and $500 million for venture capital. “While this may be commendable, reducing the SR&ED program budget envelope by $1.33 billion over five years means the actual contribution to innovation is only $270 million over five years, which is not all that much,” added Michel Lefebvre.
Bernard Poulin, Tax Partner, echoed Michel’s comments, “We are aware that choices had to be made to support innovation, our competitive and growth linchpin. Nevertheless, it would have been better to maintain and even increase corporate SR&ED tax credits.”
Business transfer tax equity reminder
Additionally, Raymond Chabot Grant Thornton is taking this opportunity to emphasize the need to quickly resolve a tax issue that has gone on far too long: tax inequity on business transfers. On December 2, 2010, the Firm sent a copy of its report – “Business Transfers: Problems and Suggested Solutions” (www.rcgt.com/en/news/business-transfers-report) – to the Quebec and federal Finance Ministers and has since pursued this issue through its budget comments last year and by making the tax authorities aware of this unfavourable situation. “At issue is the fact that, from a tax perspective, there is a disadvantage in selling a business to a son or daughter instead of to a third party. At a time when entrepreneurship is on the decline in Canada, it’s imperative to support family business transfers,” Jean Gauthier mentioned.
For her part, Suzanne Landry, University Associate, HEC Tax Professor, and the study’s main author added: “In an intergenerational business transfer, the capital gain is considered to be a dividend, which results in the seller losing the benefit of the $750,000 capital gain deduction. The federal government should resolve this inequity quickly to support our successors, a key component to our competitiveness.”
About Raymond Chabot Grant Thornton
Founded in 1948, today Raymond Chabot Grant Thornton is a leader in the fields of assurance, taxation, consulting services, business recovery and reorganization. Its strength is based on a team of over 2,200 people including some 230 partners in more than 90 offices in Québec, eastern Ontario and New Brunswick. For more than 30 years, Raymond Chabot Grant Thornton has been a member of Grant Thornton International Ltd providing its clients with the expertise of the member and correspondent firms in more than 100 countries.
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