Tax Measures outlined in Minister of Finance Mandate Letter
On December 16, 2021, the Office of the Prime Minister issued a mandate letter to the Deputy Prime Minister and Minister of Finance, Chrystia Freeland. The letter asked that steps be taken to establish or strengthen programs addressing public health, Canadian supply chains, labour shortages, climate initiatives, housing, Indigenous self-governance, public infrastructure investment, banking regulation and other public policy initiatives. The following are among the more noteworthy tax-related measures addressed in the mandate letter:
- establish a minimum 15 per cent tax rule for top-bracket earners (presumably as an addition or alteration to the existing “alternative minimum tax” regime);
- implement a tax on luxury cars, boats and planes;
- invest in the Canada Revenue Agency to “close the tax gap and combat aggressive tax planning and avoidance”;
- modernize the general anti-avoidance rule regime to focus on economic substance and restrict the ability of federally regulated entities to use tiered structures as a form of corporate tax planning that flows Canadian-derived profit through entities in low-tax jurisdictions in order to reduce taxes back in Canada;
- introduce an investment tax credit for capital invested in Carbon Capture, Utilization and Storage projects;
- establish an anti-flipping tax on residential properties, requiring properties to be held for at least 12 months;
- implement Canada’s “underused housing tax” on non-resident, non-Canadian owners of vacant, underused housing, and subsequently work to include foreign-owned vacant land within large urban areas;
- amend the federal Income Tax Act (“ITA”) to require landlords to disclose in their tax filings the rent they receive pre- and post-renovation and to pay a proportional surtax if the increase in rent is excessive;
- work towards bringing the new OECD/G20 agreement on tax reform related to the world’s largest corporations into effect and then legislate its implementation; and
- amend the ITA to allow privately owned, Canadian-controlled businesses to immediately expense up to $1.5 million of growth-enhancing investments, such as software, patents and machinery.
The measures outlined above were previously announced by the Federal Government, with certain measures resurfacing from past mandate letters. Certain have already been accompanied by legislation tabled in Parliament (eg, the Underused Housing Tax Act). For others, it remains to be seen which are ultimately enacted into law or fully implemented.