Budget 2013 will target tax loopholes: KPMG

Since the Conservative government wants to balance the budget by 2015, it’s expected to stay the course in its approach this year, KPMG predicts.

Budget day is now set for March 21 and will likely bring more measures to close tax loopholes, such as the ones introduced in the previous two years’ budgets.

Read: Federal Budget slated for March 21

Budget 2012 included new rules affecting multinational corporations, while measures in the 2011 affected corporate partnerships and some people’s RRSPs.

Read: Budget 2012: Small business issues

These changes affected a broad range of corporations and individuals, so it’s difficult to predict who new tax integrity provisions will impact this year, says KPMG.

The budget could also streamline and improve the SR&ED tax incentive program, says KPMG. Based on recommendations from the October 2011 Jenkins report, called Innovation Canada: A Call to Action, these improvements could include the government implementing its commitment to the direct savings generated by previous changes. They’ll do so to support innovative private-sector businesses.

“We aren’t going to see any wide-ranging tax measures announced in the budget this year,” says Elio Luongo, Canadian managing partner, Tax, KPMG Canada.

“Given the government’s plans to balance the budget in the next few years, we don’t anticipate any major increases in spending. But the federal government has publicly stated that they plan to introduce more measures to close tax loopholes—so we should brace ourselves for a few announcements with that in mind.”

What to expect

This year’s report by the House of Commons Finance Committee highlights additional 2013 budget considerations. It listed possible:

• Business tax changes: improve the SR&ED tax incentive program to offer more direct support to innovative private-sector businesses; explore expanding the accelerated capital cost allowance to encourage construction of domestic infrastructure in the oil and gas sector.
• Personal tax changes: continue to implement pooled retirement pension plans; examine tax provisions in relation to estate and succession planning and their impact on the transfer of family owned businesses; explore tax incentives to assist skilled workers and their mobility in an effort to support skilled trade in Canada.
• Charities and NPOs: changes to the tax credit for charitable donations to facilitate greater charitable giving; eliminate or lower capital gains tax on charitable donations of real estate and similar property and the shares of private corporations.

The Finance Committee also recommends the government find ways to simplify the Income Tax Act, as well as establish a commission to undertake a comprehensive review of the tax system to ensure its fairness and neutrality by closing loopholes allowing Canadians to avoid paying tax at all.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.