Tax recommendations for this year’s budget

There’s no shortage of economic challenges these days. So, in its upcoming 2017 federal budget, Ottawa has some work to do.

From the perspective of the the C.D. Howe Institute, the government should focus on inspiring savers and investors. In its annual shadow federal budget, the organization makes a number of recommendations. Those include:

• Set a credible path to balance and hold the line on transfers to other levels of government. Also, contain costs by shrinking or eliminating many tax expenditures, including boutique credits.
• Help near-retired and retired Canadians by raising limits for RRSP and defined-contribution pension plan savers. Also, eliminate mandatory drawdowns from registered retirement income funds (RRIFs).
• Encourage businesses to grow by replacing preferential tax treatment for small businesses. One option, says C.D. Howe, is offering temporary preferential treatment for young businesses.
• Make Canada more attractive to high earners by raising the threshold for the top personal tax rate from $202,800 to $402,800.
• When it comes to marijuana, discourage the black market and leave room for provincial levies by applying only GST.

The authors of the shadow budget are C.D. Howe’s president and CEO William B. P. Robson, director of research Alexandre Laurin, and policy analyst Rosalie Wyonch. They want the federal government to cut the deficit while boosting growth.

In their report, the team notes, “This shadow budget ensures that, even with cautious economic forecasts and prudence cushions, the ratio of federal debt to gross domestic product will stabilize immediately.”

They add, “Transforming election promises into a coherent fiscal plan is always a challenge in the transition from campaigning to governing,” which is why a government’s first budget often lays the groundwork for change but “marks time.”

This second budget from Prime Minister Trudeau and Finance Minister Morneau, says C.D. Howe, “needs to rise to that challenge. To prevent endless demands of various stakeholders from driving spending and borrowing beyond responsible limits, Canada badly needs a serious federal budget framework.”

Read the full report.

Further commentary

Earlier this month, consulting firm Raymond Chabot Grant Thornton also offered up its recommendations. It says the focus should be on the competitiveness and productivity of businesses.

As such, the firm notes in a release that the 2017 federal budget should look at tax incentives, entrepreneurship, innovation and business immigration.

For example, one of its recommendations is that the government “abolish corporate income tax on the first $500,000 of an SME’s taxable income, provided that the savings be invested in productivity, employment and innovation in a manner that avoids abuse. Investments could be subject to accelerated CCA, possibly grossed up in the year, or to a tax credit.”

Further, the firm says, the government should “commit […] to amending tax legislation to make business transfers between family members more equitable, from a tax perspective, for all businesses in all sectors.”

Also read:

How tax rules disadvantage family business succession

CPA Canada looking for clarity on deficit in 2017 budget

Canada must focus on jobs and trade, says growth council