Liberal tax promise tracker: Legislative limbo edition

A spring budget could be “a tall order,” said Brian Ernewein, senior advisor, national tax, with KPMG LLP in Ottawa. He made the comment during a webinar presentation on Thursday about evolving tax legislation in Canada and internationally.

For example, the finance minister, François-Philippe Champagne, was in his role for a mere nine days when the election was called, Ernewein noted, and newly elected Prime Minister Mark Carney will be naming cabinet ministers next week. Also, the U.S. is discussing the potential for a major tax bill, and those discussions could continue into the summer.

“It would seem reasonable for Canada to take that [U.S. discussion] into account,” Ernewein said. Thus, the federal government “couldn’t have the budget before that U.S. bill was locked down, which would point to a fall budget.”

Still, certain tax proposals could be implemented ahead of a budget. Specifically, Carney said in a news conference last week that the Liberals’ proposed one-percentage-point cut to the lowest federal tax bracket — to 14% — would be in place by Canada Day.

That measure is “not going to affect tax returns on July 1,” Ernewein said, but it’s relevant to withholding tax tables for source deductions, for example. “We may well see legislation or a ways and means motion — at least on that particular measure — being put forward in Parliament this spring.”

Any additional legislation before summer recess would likely be “a moonshot” for the government, Ernewein said in an interview.

Other straightforward tax-related election promises that would be relatively easy to draft and that have significance for planning decisions include:

• a reduction in mandatory minimum RRIF withdrawals by 25% for one year;
• the removal of GST for first-time homebuyers on homes up to $1 million;
• the repeal of the consumer carbon tax; and
• for businesses, a boost to the scientific research and experimental development (SR&ED) program and an extension of the accelerated investment incentive (these enhancements build on proposals in the fall economic statement).

Certain outstanding tax measures are also straightforward. For example, the Liberals dropped the proposed increase to the capital gains inclusion rate from the 2024 budget, and maintained the proposed increase in the lifetime capital gains exemption to $1.25 million from $1 million on the sale of small business shares and farm and fishing property. That increase was effective on June 25, 2024, but legislation must be introduced.

Also, for businesses, the Liberals proposed expanding clean economy tax credits. These include the proposed clean electricity and electric vehicle supply chain investment tax credits. For businesses considering “investments that depend on … some combination of those credits, it would be helpful if that legislation went forward,” Ernewein said in an interview. “A lot of it has been drafted.”

Legislation to watch for in the coming months

Other tax-related election promises include:

• an increase of 5% to the guaranteed income supplement for a year;
• a new training benefit worth up to $15,000 for mid-career workers in manufacturing, construction, health care and tech;
• an apprenticeship grant of up to $8,000;
• an expansion of the labour mobility tax deduction (for workers who travel more than 120 km from home to a job site);
• a review of the corporate tax system;
• a review of the process for applying for the disability tax credit; and
• the introduction of flow-through shares for tech startups.

The Liberals’ fiscal plan released during the election included revenue from more tax penalties and fines, although no details were provided. “There’s a question in my mind as to what that will translate into, whether or not it’ll be more efforts to examine the tax affairs of large business or wealthy taxpayers,” Ernewein said. “It’s very vague.”

Several outstanding tax measures were addressed in draft legislation tabled on Aug. 12, 2024, including technical amendments to the trust reporting legislation; the proposed Canadian Entrepreneurs’ Incentive, which was effective Jan. 1, 2025; and proposed new audit powers for the Canada Revenue Agency related to noncompliance with information requests.

Regarding the proposed audit powers, “If I were making my guess, that would not be what a new government trying to put a bright face on things might be leading with” when Parliament sits later this month, Ernewein said. However, “It’s probably still coming, maybe later this fall.”

Overall, “I think the government will adopt most of what remains outstanding, but [the measures] will be discussion item[s] for the new minister of finance and finance officials,” he said.

Also watch for progress on announcements made in the fall economic statement, such as making the Canada Disability Benefit — to be distributed beginning July 2025 — tax-exempt.

Proposals with no major updates since our last check-in

Aging at home

Three promises from the Liberals’ 2021 election platform were highlighted in the final report from the National Seniors Council regarding aging at home, which was commissioned by the ministers of seniors and of health and released in 2024:

• an aging-at-home benefit;
• a permanently increased guaranteed income supplement; and
• a change to the Canada caregiver credit to make it refundable.

The latter two promises have appeared in mandate letters for relevant ministers, and none of the three promises has been proposed in federal budgets or legislation.

Other outstanding Liberal promises 

Implementing a career extension tax credit for working seniors was promised in the Liberals’ 2019 election platform and mentioned in former finance minister Chrystia Freeland’s 2021 mandate letter. It appeared in the 2024 pre-budget report of the Standing Committee on Finance, but did not appear in the budget itself.

Nothing has been announced regarding these other 2019 election promises:

• increasing the Canada child benefit by 15% for kids younger than age one;
• making employment insurance (EI) maternity and parental benefits tax-exempt; and
• doubling the child disability benefit.