TORONTO/OTTAWA, March 29, 2012 - Today's federal budget brought both a message of growth and change to the Canadian tax system, positioning Canada for fiscal sustainability, says KPMG. As predicted by KPMG on February 29, the Budget includes cuts to government programs, including the retirement income system, Old Age security and R&D tax incentives.
"The government is looking to support innovation in Canada using a markedly different funding model," says Elio Luongo, Canadian Managing Partner, Tax with KPMG in Canada. "Today's budget announced the first steps in implementing the government-commissioned Jenkins Report."
- Effective immediately, the government announced $1.1 billion for direct research and development support as well as providing $500 million for venture capital initiatives
- In an effort to simplify the SR&ED program and make the program more cost-effective and streamline the compliance and administration efforts of business and CRA, the budget announced the reduction of general tax credit rate to 15% (from 20%), effective January 1, 2014
Old Age Security
- The age of eligibility for Old Age Security (OAS) and Guaranteed Income Supplement (GIS) will be gradually increased from 65 to 67, starting April 2023, with full implementation by January 2029
- Starting on July 1, 2013, individuals will be allowed to voluntarily defer their OAS pension, for up to five years. These individuals will then receive a higher actuarially adjusted annual pension
Retirement Income System
- The budget proposes new prohibited investment and advantage rules to directly prevent retirement compensation arrangements from engaging in non-arm's length transactions
International tax changes
- The budget proposes that the debt-to-equity ratio be reduced to 1.5:1 for all corporate taxation years that begin after 2012
Business tax changes
- Under the budget proposal, the CRA will accept a late designation of an eligible dividend if it is made within the three-year period following the day on which the designation was first required to be made
- Accelerated Capital Cost Allowance for clean energy generation equipment, including waste-fuelled thermal energy equipment, district energy system equipment
The KPMG Perspective
KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG member firms around the world have 145,000 professionals, in 152 countries.
The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.
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Senior Manager, Media Relations
KPMG in Canada
Manager, Media Relations
KPMG in Canada