With the Conservative government planning to balance its books in 2015, KPMG expects the Harper government will continue to tighten the tax system by closing “tax loopholes” and introduce a range of tax measures to achieve tax fairness. Budget day is set for February 11.
The government could comment on the OECD’s push for greater tax transparency and its ambitious Action Plan on Base Erosion and Profit Shifting (BEPS) that Canada and other G20 leaders signed in July 2013. The government may use the budget to signal how Canada will respond to the BEPS action plan, including the OECD timelines, to implement the various international initiatives.
Canada has been in talks with the US government to enter into an inter-governmental agreement (IGA) to streamline FATCA (the US Foreign Account Tax Compliance Act) compliance for Canadians, and the budget may also include details of the IGA to simplify practical implementation and reduce costs.
More on what to expect
This year’s report by the House of Commons Finance Committee, “The Future We Want: Recommendations for the 2014 Budget [PDF 1.5 MB]”, highlights additional 2014 budget considerations and potential tax changes. KPMG believes the following recommendations may be included in the budget:
- “Tax loopholes” – conduct a comprehensive review of the tax system to ensure its fairness and neutrality by continuing to close what it refers to as “tax loopholes”; examination of additional ways to better equip the CRA to combat tax evasion.
- Business tax changes– investigate expanding the accelerated capital cost allowance to encourage the construction of domestic infrastructure in the oil and gas sector; examine tax provisions in real estate to allow small investors to defer tax on income from the sale of property; continue to promote tax incentives to encourage the development and use of clean energy generation; consider making permanent the temporary 15 per cent Mineral Exploration Tax Credit, to support junior mineral exploration.
- Personal tax changes – changes to the tax credit for charitable donations to facilitate greater charitable giving; continue implementing Pooled Registered Pension Plans; explore tax incentives to assist skilled workers in enhancing their mobility in order to support skilled trades in Canada.
The Finance Committee also recommends the government find ways to simplify the Income Tax Act, ensure the timely assessment of income tax returns, and explore the possibility of permitting consolidated reporting.
“With the government’s goal to balance the budget by next year, we don’t anticipate major increases in spending. We still expect to see a range of tax measures as the Conservatives maintain their focus on tax fairness and tax tightening measures. With that in mind, we may also see some signals of things to come such as joint filing by spouses, business initiatives on training incentives for young apprentices and more changes to certain incentive programs and deductions.”
- Elio Luongo, Canadian Managing Partner, Tax, KPMG in Canada.
KPMG on the Hill
KPMG will be on the frontline on budget day to provide commentary and explain the budget’s impact. Budget highlights will be made available late afternoon on budget day. Details will be made available at kpmg.ca/budget2014.
KPMG Spokespeople Across the Country
KPMG’s Tax professionals from coast to coast are available to provide regional insight leading up to federal budget. With more than 30 offices across the country, our regional professionals can comment on the budget’s regional impact for Canadians and businesses.
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