Minister of Finance Jim Flaherty today tabled the 2013 Federal Budget (the “Budget”) entitled Jobs, Growth and Long-Term Prosperity – Economic Action Plan 2013.
We are pleased to provide our summary of tax measures contained in the Budget.
The Budget proposed no changes to general corporate income tax rates. While there are no changes to the marginal income tax rates applicable to individuals, the dividend tax credit available in respect of non-eligible dividends is decreased, effectively increasing the personal income tax rate applicable to these dividends. There were also certain changes to tax credits applicable to individuals.
New spending contained within the Budget is primarily focused on actions to support jobs and growth with these expenditures totalling approximately $900 million in the 2014 and 2015 fiscal years.
Identified sources of new revenues contained in the Budget are mostly derived from closing tax loopholes, combating tax avoidance and focused Canada Revenue Agency (“CRA”) compliance programs. The closing of tax loopholes and compliance measures are forecast to increase revenues by approximately $400 million in the 2014 fiscal year, $1.4 billion in the 2015 fiscal year and approximately $6.6 billion over the next five years. In comparison, savings from spending restraint are forecast to be about $100 million each year in the next five years. The significant focus on tax loopholes and compliance programs is wide-ranging and diverse, covering many areas including tax loss trading, life insurance products, trusts (both Canadian resident and non-resident), thin capitalization rules, targeted GST provisions, the mining industry, derivative transactions that would otherwise convert fully taxable ordinary income into capital gains, limiting the income reserve for amounts received for the purpose of funding future reclamation costs, extending the reassessment period for certain tax avoidance transactions and introducing new penalties and criminal offences relating to electronic suppression of sales software. These measures are more fully discussed in our summary.
From a fiscal perspective, the Budget forecasts a deficit of $25.9 billion for 2013 (compared to a 2013 deficit of $21.1 billion that was projected in the 2012 Budget), $18.7 billion for 2014 and $6.6 billion for 2015. A $0.8 billion surplus is projected for 2016.
Our summary of tax highlights contained in the Budget follows.