Justin Trudeau has secured his third term as Prime Minister as the Liberal Party of Canada emerges victorious in the 2021 election, forming a minority government. Despite the Canada’s Liberal Party tenure in power since 2015, they have unveiled significant platform promises that are expected to have a substantial impact on the tax landscape for Canadians. However, due to the nature of a minority government, the implementation and precise effects of these initiatives on taxes remain uncertain.
Proposed Changes to Income Tax Rates
The Liberal Party has put forth a series of proposals regarding income tax rates that aim to address certain issues and ensure fairness in the tax system. Here are the key highlights:
- Minimum Tax and Basic Personal Amount Increase: The Liberals plan to establish a minimum tax rate of 15% for individuals who qualify for the top income bracket. This measure aims to prevent excessive use of deductions and credits to avoid paying taxes. Additionally, they will continue the phased-in increase of the basic personal amount to $15,000 over a four-year period. This change is targeted at benefiting lower-to-middle-income taxpayers.
- Corporate Taxes and Global Minimum Tax: To tackle the issue of entities avoiding or underpaying taxes relative to their profits, the Liberals will collaborate with international partners to implement a global minimum tax for multinational corporations. This measure seeks to ensure that these corporations pay their fair share of taxes.
- Corporate Income Tax Rate Increase for Banks and Insurance Companies: The Liberal Party intends to raise the general corporate income tax rate from 15% to 18% specifically for banks and insurance companies earning over $3 billion in profits. This adjustment reflects their belief that these institutions should contribute more to the tax system, especially considering their substantial recovery from the economic impact of the COVID-19 pandemic, largely supported by government relief measures.
- Canada Recovery Dividend and Increased CRA Resources: To address aggressive tax planning and tax avoidance, the Liberals plan to introduce a Canada Recovery Dividend on large banks and insurance companies. This measure aims to further capture the benefits derived from government COVID relief measures. Additionally, the resources of the Canada Revenue Agency (CRA) will be bolstered by an annual increase of $1 billion to enhance its capabilities in combatting these practices effectively.
It is important to note that these proposals by the Canada’s Liberal Party are subject to potential changes and implementation based on the political landscape and legislative processes.
Proposed Changes to Home Ownership by the Liberal Party
Recognizing the challenges faced by many Canadians in accessing the housing market, the Liberal Party has outlined several measures aimed at addressing these issues. Here are the key proposals:
- Tax-Free First Home Savings Account: To assist Canadians under the age of 40 in saving for their first home, the Liberals plan to introduce a tax-free First Home Savings Account. This account would enable individuals to save up to $40,000 towards their first home, providing a valuable resource to help aspiring homeowners achieve their goals.
- Increased First-Time Home Buyers Tax Amount: The Liberal Party intends to double the First-Time Home Buyers Tax Amount from the current $5,000 to $10,000. This adjustment aims to provide additional financial support to first-time homebuyers, assisting them in managing the costs associated with purchasing their first property.
- Non-Resident Property Tax and Foreign Ownership Restrictions: To address concerns related to non-resident ownership and housing availability, the Liberals plan to implement an annual 1% tax on the value of vacant or under-used properties owned by non-residents. This measure seeks to discourage property speculation and ensure that housing resources are utilized effectively. Additionally, they will impose a temporary ban on new foreign ownership of Canadian residential properties for a period of two years.
- Introduction of an “Anti-Flipping Tax”: The Liberal Party will introduce an “anti-flipping tax” on residential properties, requiring them to be held for a minimum of 12 months. This measure is designed to discourage short-term property flipping, which can contribute to housing market instability and affordability challenges.
It is important to note that these proposals are subject to potential revisions and implementation based on the political landscape and legislative processes. The aim of these measures is to promote greater affordability, accessibility, and stability in the housing market for all Canadians.
Also read: Demystifying Income Taxes in Canada: A Comprehensive Guide
Proposed Measures for Workers’ Rights, Canadian Families, Seniors, Disabled Taxpayers, and Climate Change by the Liberal Party
The Liberal Party has outlined a series of proposals aimed at improving workers’ rights, supporting Canadian families, enhancing benefits for seniors and disabled taxpayers, and addressing climate change. Here are the key initiatives:
Workers’ Rights: Legislation has already been passed to enhance the Canada Workers Benefit for 2021 and introduce a “secondary earner exemption” of $40,000 for the lower-income spouse or common-law partner Canada’s Liberal Party. In addition, a new Employment Insurance (EI) benefit will be introduced for self-employed Canadians, delivered through the tax system, providing unemployment assistance similar to EI for up to 26 weeks. The Liberals will also establish the EI Career Insurance Benefit, offering extended coverage for individuals who have worked five years or more for the same employer Canada’s Liberal Party. To support those working from home, the temporary flat-rate deduction for home office expenses will be extended for an additional two years until the 2022 tax year, with an increased deductible amount of $500. Moreover, a new Labour Mobility Tax Credit will be introduced, enabling workers in the building and construction trades to deduct eligible travel and temporary relocation expenses of up to $4,000, providing them with a tax credit of up to $600 annually.
Canadian Families: A significant campaign promise from the Liberal Party is to collaborate with provinces to establish a universal child-care system costing $10 per day. Additionally, in the housing sector, they will introduce a Multigenerational Home Renovation tax credit, offering a 15% credit on renovation and construction costs of up to $50,000 for families seeking to add a secondary unit to their homes to accommodate a family member. The Medical Expense Tax Credit will also be expanded to include reimbursed IVF expenses for surrogate mothers.
Seniors: Starting July 2022, the Canada’s Liberal Party will increase the Old Age Security (OAS) by 10% for seniors aged 75 or older, with the necessary legislation already passed. They will also raise the Guaranteed Income Supplement (GIS) by $500 per person and $750 for couples, as well as increase the CPP survivor benefit by 25%. Furthermore, the Home Accessibility Tax Credit will be doubled, allowing for an additional maximum credit of $1,500. To address aging-related challenges, a panel of experts will be established to develop an Aging at Home Benefit.
Disabled Taxpayers:
The Liberal Party intends to introduce the Canada Disability Benefit, a monthly benefit for individuals aged 18 to 64 with disabilities, similar to the Canada Child Benefit and GIS. The Canada Caregiver Tax Credit will be converted into a refundable tax credit, providing further support. Additionally, the eligibility for the Disability Tax Credit will be expanded by modifying the rules related to mental functions necessary for everyday life, life-sustaining therapy, and the calculation of therapy time.
Climate Change:
The Liberals plan to continue existing policies, including the carbon tax and Climate Action Incentive, in provinces that do not meet federal standards. They will reduce the corporate income tax rate by 50% for manufacturers of zero-emission technologies and develop an investment tax credit of up to 30% for various clean technologies, including low-carbon and net-zero technologies.
Please note that these proposals are subject to potential revisions and implementation based on the political landscape and legislative processes. The aim of these measures is to promote workers’ rights, strengthen Canadian families, support seniors and disabled taxpayers, and combat climate change.
Economic Stimulus and COVID Recovery Benefits
The Liberal Party has put forward a comprehensive plan to stimulate the economy and aid in the recovery from the COVID-19 pandemic. Here are the key initiatives:
Support for Small Businesses: To encourage growth and investment, the plan allows Canadian-controlled private corporations (CCPCs) to immediately expense up to $1.5 million of investments in areas such as software, patents, and machinery. Additionally, the Canada Small Business Financing Program will be enhanced by increasing the maximum loan amount from $350,000 to $500,000. Furthermore, the coverage period for loans related to equipment and leasehold improvements will be extended from 10 to 15 years.
Also read: The Role of Professional Accountants in Cloud Accounting for Canadian Businesses
Continued Support for Businesses and Industries:
The Liberals have pledged to extend the Canada Recovery Hiring Program until March 31, 2022, providing ongoing wage support for businesses. Temporary wage and rent support will be introduced specifically for Canada’s tourism industry, recognizing the challenges it has faced during the pandemic. The Arts and Culture Recovery Program will be launched, matching ticket sales for performing arts, live theatres, and cultural events to compensate for reduced capacity. Moreover, the film and television production sector will receive COVID-related insurance coverage to ensure the continuity of operations. Additionally, a tax credit will be introduced to assist small businesses in improving their ventilation systems, promoting a safer environment for employees and customers.
These measures are designed to provide much-needed support to small businesses and industries that have been severely impacted by the pandemic. The aim is to stimulate economic growth, create jobs, and foster a robust recovery for all sectors of the economy.