Federal Budget 2018: Raymond Chabot Grant Thornton voices its opinion and publishes its tax bulletin
OTTAWA, February 27, 2018 – Raymond Chabot Grant Thornton published a summary of the tax measures announced today by Canada’s Finance Minister and highlights the elements that pertain to the country’s growth as well as wealth-creating businesses. The tax bulletin was prepared by a team of the firm’s specialists in the lock-up that can be accessed here.
Finance Minister Bill Morneau’s third budget includes significant measures for the Canadian economy. Among them, Raymond Chabot Grant Thornton welcomes the new strategy for women and entrepreneurs.
The budget proposes, for example, to provide $105M over five years to regional development agencies to support investments in women-owned businesses that, according to the budget document, represent fewer than one in six businesses (16%). The government has also decided to increase its support to the growth of women-led businesses by providing $1.4B in financing over three years, starting in 2018–2019, through the Business Development Bank of Canada. To support access to international markets, women-led businesses that are exporting or looking to begin exporting could benefit from $250M over three years through Export Development Canada.
The firm also applauds financial measures to stimulate research and to support researchers across the country.
Fair tax system with incentives for businesses: a missed opportunity!
Notwithstanding its strategic measures for Canada and Canadian businesses, the federal government would have done well to take a bolder tax approach to stimulate the growth of Canadian businesses. The current economic situation combined with the uncertainty surrounding NAFTA and the U.S. President’s tax reform are cause for concern for businesses.
Emilio B. Imbriglio , President and CEO, stated: “Canadian businesses must remain competitive, especially in light of U.S. tax changes. Our corporate tax rates are now similar to those of our neighbours to the South—we no longer have the benefit of having a more appealing tax rate. This is a deciding factor when a Canadian entrepreneur is contemplating setting up operations in Canada or in the United States. Corporate tax rates should be further reduced, specifically by eliminating the tax on the first $500,000 of taxable income for small businesses.”
The firm maintains that, when it comes to the Finance Minister’s tax reform, the Canadian tax system must undergo a complete revamp in order to make it simpler, fair, efficient and transparent. Priority should be given to a national consultation in this regard, with a clear timetable and transitional measures, so that taxpayers can get organized accordingly. Tax Partner, Sylvain Moreau stated: “Today, Mr. Morneau has decided to maintain his objective of taxing passive income, that is contrary to the vast majority of stakeholders’ stated views during the public consultation. In our opinion, this is not a true tax reform, but rather, a partial measure that should be part of a global reflection.”
Unlike the Quebec government, the federal government has yet to adopt tax measures to ensure an equitable process for intergenerational business transfers. Sylvain Gilbert, Tax Partner stated: “There is an acute shortage of entrepreneurs to take over from owners on the verge of retirement. We can no longer refuse the capital gain exemption of up to $848,252 on the sale of a business by a family member. We must have a fair tax system!”
“This measure is impeding Canadian entrepreneurship,” added Eric Dufour, Vice-President and Entrepreneurial Succession National Leader . “Our experience with more than 500 business succession and transfer cases each year demonstrates that many owners are not selling to their children because they would lose a significant amount of money or they choose to sell to a third party to avoid being taxed on the capital gain.”
Timetable to balance the budget
This budget does not anticipate balancing the budget in the near future or include a plan with targets, such as a long-term infrastructure investment program. In 2022-2023, the deficit is expected to be $12.5B. Imbriglio concluded: “With rising interest rates, such an exercise would have sent a positive signal to lenders and rating agencies, while making government budget planning easier.”
Consult the pre-budget recommendations submitted to the Canada and Quebec Finance Ministers by Raymond Chabot Grant Thornton.
About Raymond Chabot Grant Thornton.
Founded in 1948, Raymond Chabot Grant Thornton has become a Canadian leader in the areas of assurance, tax, consulting services and business recovery and reorganization, with more than 2,300 professionals, including approximately 200 partners. Together, Raymond Chabot Grant Thornton and Grant Thornton LLP, another Canadian member firm of Grant Thornton International Ltd, comprise more than 4,200 professionals and close to 140 offices across Canada to help Canadian organizations achieve their full growth potential both locally and globally. Grant Thornton International Ltd’s member and correspondent firms provide clients with the expertise of some 47,000 professionals in more than 130 countries
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