Ahead of the October federal budget, various groups are calling on Canada’s Finance Department to prioritize — and expand — the government’s promised review of the corporate tax system and to introduce measures to support small businesses.
“Canada’s corporate tax system hasn’t been fully reviewed in nearly 60 years,” the Conference for Advanced Life Underwriting (CALU) said in a pre-budget submission. It recommends that the government “promptly” begin its review, which was an election promise, and include a focus on small business taxation.
Collectively, tax rules such as those related to split income, passive investments, intergenerational business transfers and employee ownership trusts have adverse effects on businesses and the economy, CALU said: “Impacts include the inequitable treatment of different types of businesses; a significant increase in business planning complexities and compliance costs; and disincentives to establishing and growing small businesses in Canada.”
CPA Canada would like to see the feds’ review of the corporate tax system extended to personal and commodity taxes. “A full-scale review is essential to address systemic deficiencies, respond to fiscal pressures and align with international best practices,” CPA Canada said in its pre-budget submission.
CPA Canada also warned against tax policies that lack clarity or impose unintended burdens, and erode public trust and compliance. The organization cited the proposed (now reversed) capital gains tax changes, last-minute filing reprieves related to bare trusts and underused housing tax, and the rollout of the GST holiday.
In its pre-budget submission, the Canadian Federation of Independent Business recommends a slew of measures to support businesses, including implementing the promised Canadian Entrepreneurs’ Incentive, which hasn’t yet been included in draft legislation; increasing the federal small business deduction threshold to $700,000 from the current $500,000; and temporarily reducing the small business federal tax rate to 0% from the current 9%.
Support for retirement account updates, climate disclosures
Another CPA Canada recommendation is to expand adoption of the Canadian Sustainability Disclosure Standards, which align with those of the International Sustainability Standards Board.
“Clear, consistent reporting on sustainability performance and climate-related risks is essential to informed decision-making by investors, employees, customers and the public,” CPA Canada said.
The organization highlighted the Canadian Securities Administrators’ decision earlier this year to stop its work on new rules to mandate climate disclosures and expand existing diversity-related disclosure requirements. The turnabout came amid U.S. trade tensions.
“The Canadian Securities Administrators’ recent decision to pause work on mandatory climate disclosure requirements risks undermining transparency and weakening Canada’s global standing,” CPA Canada said in its submission. “Federal leadership must sustain momentum and ensure the country keeps pace with international developments.”
Grant Vingoe, CEO of the Ontario Securities Commission, has said the regulators’ work on mandatory climate disclosures could resume within a couple years.
CALU continues to recommend, as it did in an earlier version of its pre-budget submission, updates to RRSP and RRIF rules, such as allowing RRSP contributions past age 71, deferring RRSP conversion to a RRIF to age 75, and reducing RRIF minimum withdrawal amounts.
In a report last week, and during the federal election this past spring, the Securities and Investment Management Association called for retirement policy reforms, including RRIF rule updates.
The government’s pre-budget consultations concluded on Wednesday, and Prime Minister Mark Carney said the budget will include a plan for fiscal belt-tightening. The specific date in October for the budget’s release has yet to be announced.