2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
Finance Minister Bill Morneau delivered the government’s 2017 federal budget on
March 22, 2017. The budget expects a deficit of $23 billion for fiscal 2016-2017 and
forecasts a deficit of $28.5 billion for fiscal 2017-2018.
The budget continues the government’s strong focus on innovation and skill
development. Although the budget did not feature significant tax changes, it does
include many measures that affect Canadian businesses and individuals. Specifically, it
made changes to the timing and recognition of gains and losses for derivatives, and
clarified the definition of factual control used, for instance, in determining whether two
or more Canadian controlled private corporations (CCPCs) are associated
corporations. The budget also eliminates the ability for designated professionals to
elect to use billed-basis accounting. Further, the budget announced that Finance is
reviewing the use of certain tax planning strategies involving private corporations.
As expected, the budget eliminates certain personal tax credits and deductions
including the public transit tax credit and the home relocation loan deduction. However,
the budget did not include any changes to the capital gains inclusion rate, stock options
or any specific tax measures related to the OECD Base Erosion and Profit Shifting
(BEPS) initiative.
With this budget, the government is investing in innovation and skills training to
accelerate growth. Included in this investment is $950 million over five years to support
a small number of business-led innovation clusters, as well as an additional $400
million over five years to support certain new clean technologies. As part of Canada’s
skills development program, the budget also contains improvements to the temporary
foreign worker program and to the international mobility program.
Page 1 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
The tax highlights of the budget are as follows:
Business tax changes
Factual control
In general there are two forms of control of a corporation; de jure (legal) control and de
facto (factual) control.
A recent court case held that, in determining whether factual control exists, there must be a
“legally enforceable right and ability to effect a change to the board of directors or its
powers, or to exercise influence over the shareholder or shareholders who have that right
and ability”. The case further provided that “an interpretation of subsection 256(5.1) that
encompasses “operational” control would import a degree of subjectivity in the de facto
analysis that, in my view would lead to unpredictability”.
The budget proposes legislation to add subsection 256(5.11), which provides that, a
determination of whether a taxpayer has any direct or indirect influence that, if exercised,
would result in control in fact of the corporation:
•
Shall take into consideration all factors that are relevant in the circumstances; and
•
Shall not be limited to, and the factors to be considered need not include whether
the taxpayer has a legally enforceable right to effect a change to the board of
directors or its powers, or to exercise influence over the shareholder or
shareholders who have that right and ability.
The proposed legislation is effective for taxation years that begin on or after March 22,
2017.
Investment fund mergers
Currently there are limited circumstances in which investment funds can reorganize on a
tax-deferred basis.
The budget extends the ability to reorganize on a tax-deferred basis to switch fund
corporations and segregated funds in certain circumstances.
Switch fund corporations
The 2016 budget eliminated the ability for a shareholder in a switch fund corporation to
exchange shares of one class for another class (i.e., from one fund to another) on a taxdeferred basis.
The budget extends the mutual fund merger rules to facilitate the reorganization of a mutual
fund corporation that is a switch fund corporation into multiple mutual fund trusts. To
Page 2 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
qualify, all or substantially all of the assets allocable to a class of a mutual fund corporation
must be transferred to a mutual fund trust and the shareholders of that class must become
unitholders of that mutual fund trust.
The proposal is effective for transfers occurring on or after March 22, 2017.
Segregated funds
Segregated funds are life insurance policies that have many characteristics of mutual fund
trusts. However, segregated funds cannot currently merge on a tax deferred basis.
The budget proposes legislation that gives segregated funds the ability to merge on a taxdeferred basis. All the property of one segregated fund must become property of another
segregated fund and every person that was a beneficiary of the first segregated fund must
cease to be a beneficiary of the first fund and become a beneficiary of the second
segregated fund.
This proposal is effective on January 1, 2018.
Derivatives—New mark-to-market election
The budget proposes to introduce an elective mark-to-market regime for derivatives held on
income account. Specifically, the election will allow taxpayers to mark to market all of their
eligible derivatives. An eligible derivative will generally be any derivative held on income
account that meets certain conditions. One of those conditions is that the derivative is
valued in the taxpayer’s audited financial statements (in accordance with accounting
principles) at its fair value or otherwise has a readily ascertainable fair market value.
Upon making the election, the taxpayer will be required to include, in its annual income, the
increase or decrease in value of its eligible derivatives. For derivatives that were previously
subject to tax on a realization basis, the recognition of any accrued gain or loss at the
beginning of the first election year will be deferred until the derivative is disposed of.
The new election will be available for taxation years that begin on or after March 22, 2017.
An election will remain effective for future years unless the CRA consents to a revocation.
KPMG observations
A recent Federal Court of Appeal decision allowed a taxpayer that was not a financial
institution to use the mark-to-market method on the basis that it provided an accurate
picture of income. The budget states that the new election regime is intended to provide
a clear framework for the choice of using the mark-to-market method.
Stop-loss rule for straddle transactions
Page 3 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
The budget introduces a new anti-avoidance rule to target straddle transactions that allow
taxpayers to selectively realize gains and losses, often on derivatives. Specifically, a new
stop-loss rule will defer the realization of any loss on the disposition of a position to the
extent of any unrealized gain on an offsetting position. A gain on an offsetting position
would generally be unrealized where the offsetting position has not been disposed of and is
not subject to mark-to-market taxation.
Generally, a straddle is a transaction in which a taxpayer concurrently enters into two (or
more) positions (e.g., derivative positions) that are expected to generate equal and
offsetting gains and losses. In a basic straddle transaction, the taxpayer disposes of the
position with the accrued loss to realize the loss shortly before its taxation year end. The
taxpayer disposes of the other position to realize the accrued gain, shortly after the
beginning of the following year. The taxpayer can use the loss to offset its other income,
while deferring the recognition of the offsetting gain until the following taxation year.
For purposes of the proposed stop-loss rule, a position will generally be defined to include
any interest in actively traded personal properties (e.g., commodities), derivatives and
certain debt obligations. A number of exceptions to the stop-loss rule will apply. In
particular, the stop-loss rule will not apply to a position if:
•
It is held by a financial institution (as defined for the purpose of the mark-to-market
property rules) or a mutual fund trust or mutual fund corporation
•
It is part of certain hedging transactions entered into in the course of the taxpayer’s
business
•
It is part of a transaction (or series of transactions) none of the main purposes of
which is to defer or avoid tax or
•
The taxpayer continues to hold the offsetting position throughout a specified period
beginning on the date the position is disposed of.
The proposed anti-avoidance rule will apply to any loss realized on a position entered into
on or after March 22, 2017.
Canadian exploration expense—Discovery wells
The budget proposes to generally classify expenditures related to drilling or completing a
discovery well as Canadian Development Expenses (CDE) (these expenses are currently
treated as Canadian Exploration Expenses (CEE)). This proposal will also apply to
expenditures incurred to build a temporary access road to, or in preparing a site in respect
of, a discovery well.
The budget states that drilling expenditures can continue to be classified as CEE, or
reclassified as CEE, in situations where:
Page 4 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
•
The well has been abandoned
•
The well has not produced within 24 months, or
•
The Minister of Natural Resources has certified that the relevant costs associated
with drilling the well are expected to exceed $5 million and it will not produce within
24 months.
In addition, CEE treatment will continue to be available for other expenses such as certain
early stage surveying.
Generally, a discovery well is an oil or gas well that results in the discovery of a previously
unknown petroleum or natural gas reservoir. CDE is deductible at a 30% rate on a declining
balance basis while CEE is fully deductible in the year the expense is incurred. Flowthrough share agreements generally allow corporations to renounce both CEE and CDE to
investors who can deduct the expenses in calculating their own taxable income.
This measure will apply to expenses incurred after 2018 (including certain expenses
incurred in 2019 that could be deemed to have been incurred in 2018 under the look-back
rule). The measure will not apply, however, to expenses actually incurred before 2021
where the taxpayer has entered into a written commitment before March 22, 2017 to incur
those expenses.
Reclassification of expenses renounced to flow-through share investors
The budget proposes to no longer permit eligible small oil and gas corporations to treat the
first $1 million of CDE as CEE, for expenditures incurred after 2018 (including certain
expenses incurred in 2019 that could be deemed to have been incurred in 2018 under the
look-back rule).
An eligible small oil and gas corporation can currently treat up to $1 million of CDE as CEE
when renounced to shareholders under a flow-through share agreement. CDE is deductible
at a 30% rate on a declining balance basis while CEE is fully deductible in the year the
expense is incurred.
The proposal will not apply to expenses incurred after 2018 and before April 2019 that are
renounced under a flow-through share agreement entered into after 2016 and before March
22, 2017.
Clean energy generation equipment—Geothermal energy
The budget proposes changes to the investment in specified clean energy generation and
conservation equipment under capital cost allowance regime Classes 43.1 and 43.2. The
budget expands Classes 43.1 and 43.2 to include geothermal equipment that is used
primarily for the purpose of generating heat or a combination of heat and electricity.
Page 5 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
In addition, the budget proposes to allow geothermal heating to be considered an eligible
thermal energy source for use in a district energy system. Finally, the budget proposes to
allow expenses incurred for the purpose of determining the extent and quality of a
geothermal resource, and the cost of all geothermal drilling, for electricity and heating
projects to qualify as a Canadian renewable and conservation expense.
Electronic distribution of T4 information slips
The budget proposes to eliminate the requirement that employers must obtain express
consent from current active employees before electronically issuing a T4 information slip to
that employee, as long as certain privacy safeguards are in place. In addition, employers
will be required to issue paper copies to employees that request them. This measure
applies to T4s issued for the 2017 and subsequent taxation years.
Cash purchase tickets—Consultation
The budget announces the launch of a consultation on the income tax deferral available on
deferred cash purchase tickets for deliveries of listed grains. The budget states that there
may no longer be a clear policy rationale for maintaining the current tax deferral on deferred
cash purchase tickets received as payment for listed grains. Stakeholders have until May
24, 2017 to submit comments about the ongoing utility and/or potential elimination of this
tax deferral, including any appropriate transitional period or rules.
Gifts of medicine
The budget proposes to eliminate the additional deduction for gifts of medicine. Currently,
corporations that donate medicine from their inventory to an eligible charity can claim an
additional deduction equal to the lesser of the cost of the donated medicine and 50% of the
amount by which the fair market value of the donated medicine exceeds its cost. This
measure applies to gifts of medicine made on or after March 22, 2017.
Farming and fishing property insurers
The budget proposes to eliminate a tax exemption available for insurers of farming and
fishing property. This measure applies to taxation years that begin after 2018.
Child care space investment tax credit
The budget proposes to eliminate the investment tax credit for child care spaces. This
credit provides a 25% non-refundable tax credit on costs incurred to build or expand child
care spaces in licensed child care facilities, in certain circumstances. The maximum value
of the credit is $10,000 per space created. Unused amounts can be carried back three
years and carried forward 20 years.
Page 6 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
This measure applies to expenditures incurred on or after March 22, 2017. Under
transitional relief, the credit will be available on eligible expenditures incurred before 2020
under a written agreement entered into before March 22, 2017.
Small business tax Changes
Review of tax planning strategies involving private corporations
The budget states that the government is reviewing the use of tax planning strategies
involving private corporations “that inappropriately reduce personal taxes of high-income
earners”, including:
Income sprinkling using private corporations—Which can reduce income taxes by causing
income that would otherwise be realized by an individual at a high personal income tax rate
to instead be realized by family members who are subject to lower personal tax rates.
Holding a passive investment portfolio inside a private corporation—Which facilitates
accumulation of earnings by owners of private corporations, since corporate income tax
rates are generally lower than personal tax rates.
Converting a private corporation’s regular income into capital gains—Which takes
advantage of the lower tax rates on capital gains by converting income to capital gains,
since only one-half of capital gains are included in income.
The budget states that the government intends to release a paper “in the coming months”
setting out the nature of these issues in more detail as well as proposed policy responses.
Billed-basis accounting
Generally, taxpayers must include the value of work in progress in computing their income
for tax purposes. Certain professionals (i.e., accountants, dentists, lawyers, medical
doctors, veterinarians and chiropractors) may elect to exclude the value of their work in
progress in computing their income. This allows for a deferral of tax by permitting the costs
associated with work in progress to be expensed without the matching inclusion of the
related income.
The budget proposes to eliminate the ability to elect to use billed-basis accounting effective
for taxation years that begin on or after March 22, 2017. As a transitional relief, for the first
taxation year that begins on or after March 22, 2017, 50% of the lesser of the cost and the
fair market value of the work in progress will be taken in to account for determining the
value of the inventory. For the second and each successive taxation year, the lesser of the
cost and fair market value of work in progress will be taken into account in valuing
inventory.
Page 7 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
Personal tax changes
Anti-avoidance rules for registered plans
The budget proposes to extend the anti-avoidance rules that currently apply to certain taxassisted registered plans (i.e., Tax-Free Savings Accounts, Registered Retirement Savings
Plans and Registered Retirement Income Funds) to Registered Education Savings Plans
(RESP) and Registered Disability Savings Plans (RDSP). Specifically, the budget extends
to RESPs and RDSPs:
•
The advantage rules, which help prevent the exploitation of the tax attributes of a
registered plan (e.g., by shifting returns from a taxable investment to a registered
plan)
•
The prohibited investment rules, which generally ensure that investments held by a
registered plan are arm’s length “portfolio” investments, and
•
The non-qualified investment rules, which restrict the classes of investments that
may be held by a registered plan.
This measure generally applies to transactions occurring and investments acquired after
March 22, 2017. Investment income generated after March 22, 2017 on previously acquired
investments will be considered to be a “transaction occurring” after March 22, 2017. The
budget notes the following exceptions to the effective date:
•
The advantage rules will not apply to swap transactions undertaken before July
2017. However, swap transactions undertaken to ensure that an RESP or RDSP
complies with the new rules will be permitted until the end of 2021.
•
A plan holder may elect by April 1, 2018 to pay Part I tax (instead of the advantage
tax) on distributions of investment income from an investment held on March 22,
2017 that becomes a prohibited investment as a result of this measure, subject to
certain conditions.
Caregiver credits
The budget introduces a new Canada Caregiver Credit that replaces the existing caregiver
credit, infirm dependant credit and family caregiver tax credit. Consistent with the amounts
that could have been claimed previously, this new credit provides up to $6,883 for certain
infirm dependants of a claimant, or a claimant’s spouse or common law partner, and up to
$2,150 for certain other situations. The credit will be reduced dollar-for-dollar by the
dependent’s net income above $16,163 in 2017 (indexed to inflation). The caregiver will not
be required to live with the dependent to claim the new credit, and the credit will no longer
be available in respect of non-infirm seniors who reside with their adult children. The new
credit applies for the 2017 and subsequent taxation years.
Page 8 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
Medical expense tax credit—Eligible expenditures
The budget proposes to clarify the application of the medical expense tax credit so that
individuals who require medical intervention to conceive a child are eligible to claim the
same expenses that would generally be eligible expenditures for individuals on account of
medical infertility. This measure applies to the 2017 and subsequent taxation years.
Taxpayers will also be allowed to elect for this measure to apply for any of the immediately
preceding 10 taxation years.
Mineral exploration tax credit for flow-through share investors
The budget extends the 15% mineral exploration tax credit to flow-through share
agreements entered into on or before March 31, 2018 (from March 31, 2017). This credit is
intended to help junior mineral exploration companies raise capital by providing an
incentive to individual investors in flow-through shares issued to finance “grassroots”
mineral exploration. This measure was originally announced on March 5, 2017.
Public transit tax credit
The budget eliminates the public transit tax credit, effective July 1, 2017. As a result, the
cost of public transit passes and electronic fare cards for public transit use that occurs
starting as of this date will no longer be eligible for the credit.
Tuition tax credit for occupational skills courses
The budget extends the eligibility criteria for the 15% tuition tax credit to fees for an
individual’s tuition paid to a university, college or other post-secondary institution in Canada
for occupational skills courses that are not at the post-secondary level. To qualify, the
course must provide the individual with skills (or improve the individual’s skills) in an
occupation. To qualify, the individual must have attained the age of 16 before the end of the
year. This measure will apply in respect of eligible tuition fees for courses taken after 2016.
The budget also extends “qualifying student” eligibility to include individuals in this specific
circumstance, who otherwise meet the conditions to be a “qualifying student” for purposes
of the tax exemption for scholarship and bursary income. This measure will apply to the
2017 and subsequent taxation years.
Ecological gifts program
The budget proposes several measures relating to the ecological gifts program including:
Transfers of ecologically sensitive land or easements, covenants and servitudes on such
land (“Ecogifts”)—The budget proposes that, where eco gifts are transferred between
organizations for consideration, the transferee of such property will be subject to a 50% tax
if the transferee changes the use of the property, or disposes of the property without the
Page 9 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
consent of Environment and Climate Change Canada. Currently, the 50% tax applies to
donated land.
Private foundations—The budget proposes that private foundations no longer be permitted
to receive ecogifts.
Personal servitudes—The budget proposes that certain donations of personal servitudes
qualify as ecogifts if the personal servitude runs for at least 100 years, among other
conditions. The budget states that this is to encourage more ecogifts in Quebec. Currently,
only real servitudes may be donated under the ecogift program. These measures are
effective on or after March 22, 2017.
Home relocation loans deduction
The budget eliminates the deduction for eligible home relocation loans. This measure
applies to benefits arising in the 2018 and subsequent taxation years.
Disability tax credit—Nurse practitioners
The budget proposes to add nurse practitioners to the list of medical practitioners that can
certify eligibility for the disability tax credit. This measure applies to disability tax credit
certifications made on or after March 22, 2017.
National Child Benefit supplement
The budget proposes to delay the repeal the National Child Benefit supplement reference in
the Canada Child Benefit rules until July 1, 2018 to allow for required legislative and
administrative changes. This modification will not affect the calculation of the Canada Child
Benefit.
Allowances for members of legislative assemblies and certain municipal officers
The budget proposes to require members of legislative assemblies and certain municipal
officers, among others, to include non-accountable allowances in income. The
reimbursement of employment expenses will remain a non-taxable benefit to the recipient.
This measure will apply to the 2019 and subsequent taxation years.
International tax changes
Life insurers carrying on business through a foreign branch
Currently, Canadian life insurance companies that use a branch located in a foreign
jurisdiction to earn income from the insurance of Canadian risks are not taxable in Canada
on the income earned in that foreign branch. If that same income was earned in a
controlled foreign subsidiary of the Canadian company, it would be considered to be foreign
accrual property income (FAPI) and would be taxable in Canada on an accrual basis. The
Page 10 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
budget proposes to extend the FAPI rules to income earned in a foreign branch in respect
of the insurance of Canadian risks. The rules will apply where 10% or more of the gross
premium income earned by a foreign branch of a Canadian life insurer relates to the
insurance of Canadian risks. The budget also extends current FAPI anti-avoidance rules to
apply to foreign branches. These measures will apply to taxation years that begin on or
after March 22, 2017.
Update on BEPS initiatives
The budget does not contain specific BEPS changes, but does reiterate Canada’s intention
to ensure that its tax system meets all of the minimum standards agreed to by all
participants in the OECD’s BEPS project. The four minimum standards are as follows:
•
Country-by-country reporting—Canada has enacted legislation and released
guidance for the application of these rules
•
Treaty disputes—Canada has committed to improve efficiency and effectiveness of
the mutual agreement procedures contained its tax treaties
•
Improved transparency—Canada has already agreed to the spontaneous exchange
of tax rulings with other jurisdictions
•
Treaty abuse—Canada participated in the development of a multilateral instrument
that, when signed by participants, will enhance and potentially override specific
provisions in certain bilateral treaties.
Indirect tax changes
Taxi and ride-sharing services
The budget proposes to amend the GST/HST definition of a taxi business to include
persons engaged in a business of transporting passengers for fares by motor vehicle within
a municipality and its environs where the transportation is arranged for or coordinated
through an electronic platform or system, such as a mobile application or website. The
amendment will be effective as of July 1, 2017.
Tobacco tax
The budget proposes to eliminate the 10.5% tobacco manufacturers’ surtax. At the same
time, the budget increases tobacco excise duty rates in an effort to maintain the intended
tax burden.
The budget increases the excise duty rate to $0.53900 for each five cigarettes or fraction
thereof (from $0.52575). The budget also subjects inventories of cigarettes held by
manufacturers, importers, wholesalers and retailers at the end of March 22, 2017 to a tax of
Page 11 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
$0.00265 per cigarette (subject to certain exemptions). Taxpayers will have until May 31,
2017 to file returns and pay the inventory tax.
Further, the budget increases the excise duty rate on tobacco sticks to $0.10780 per stick
(from $0.10515), and on manufactured tobacco (e.g., chewing tobacco or finecut tobacco)
to $6.73750 per 50 grams or fraction thereof (from $6.57188). The excise duty rate on
cigars is proposed to increase to $23.46235 per 1,000 cigars (from $22.88559), and the
additional duty on cigars increases to the greater of $0.08434 per cigar and 84% of the sale
price or duty-paid value (from the greater of $0.08226 and 82%).
These measures will be effective as of March 23, 2017. The budget provides that a
corporation with a taxation year that includes March 22, 2017 and ends after this date will
be required to prorate the surtax on its Canadian tobacco manufacturing profits based on
the number of days in the taxation year that are on or before March 22, 2017.
Alcohol tax
The budget proposes to increase the excise duty rates on alcohol products by 2%, effective
March 23, 2017, in respect of duty that becomes payable after that date. The budget also
proposes that the rates be automatically adjusted by the Consumer Price Index on April 1
of every year, starting in 2018.
Tour package accommodations
The budget proposes to repeal the GST/HST rebate available to non-residents for the
GST/HST that is payable in respect of the accommodation portion of eligible tour packages.
This repeal will generally apply to supplies of tour packages or accommodations made after
March 22, 2017. As a transitional measure, the rebate will continue to be available in
respect of a supply of a tour package or accommodations made after March 22, 2017 but
before January 1, 2018 if all of the consideration for the supply is paid before January 1,
2018.
Prescription drugs
The budget proposes to add opioid overdose drug Naloxone (and its salts) to the list of
GST/HST-free non-prescription drugs that are used to treat life-threatening conditions. This
measure generally comes into effect on March 22, 2016.
Customs tariff and special import measures
Market access
The budget proposes changes to allow more apparel products from the world’s poorest
countries to qualify for duty-free treatment when imported into Canada. The budget
Page 12 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
indicates that Finance intends to introduce necessary regulatory amendments in the near
future.
Trade remedy system
The budget proposes changes to the Special Import Measures Act (SIMA) and related
trade remedy regulations to:
•
Allow domestic producers to file a complaint regarding trade and business practices
specifically intended to avoid trade remedy duties
•
Allow interested parties to request that the Canadian Border Services Agency
(CBSA) conduct a formal review to determine whether a specific product falls within
the scope of a trade remedy measure
•
Ensure that unions have the right to participate as interested parties in trade
remedy proceedings
•
Provide greater discretion to the CBSA when assessing the reliability of prices in
the exporting country in anti-dumping investigations
•
Ensure Canada properly complies with its obligations under the World Trade
Organization rules.
Administrative and other changes
Corporate and beneficial ownership transparency
The budget announces that the government will collaborate with provinces and territories to
strengthen the transparency of legal persons and legal arrangements and improve the
availability of beneficial ownership information. The government says it is looking for ways
to enhance the tax reporting requirements for trusts to improve the collection of beneficial
ownership information. These actions are intended to discourage money laundering,
terrorist financing and tax evasion.
Tax evasion and tax avoidance
The budget invests an additional $523.9 million over five years to prevent tax evasion and
improve tax compliance. The budget states that these investments will be used to fund new
initiatives and extend existing programs such as:
•
Increasing verification activities
•
Hiring additional auditors and specialists with a focus on the underground economy
Page 13 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
•
Developing robust business intelligence infrastructure and risk assessment
systems to target high-risk international tax and abusive tax avoidance cases
•
Improving the quality of investigative work that targets criminal tax evaders.
Employment Insurance benefits expanded
The budget expands employment insurance (EI) benefits by:
•
Creating a new EI caregiving benefit up to 15 weeks
•
Making EI parental benefits more flexible by allowing parents to choose to receive
EI parental benefits over an extended period of 18 months at a lower benefit rate
•
Allowing women to claim EI maternity benefits up to 12 weeks before their due date
(from the current 8 weeks).
Temporary foreign worker program and international mobility program
The budget proposes to improve and support the continued delivery of these programs by
investing $279.8 million over five years, starting in 2017-2018, and $49.8 million per year
thereafter.
Recognizing foreign credentials
The budget states that a Targeted Employment Strategy for Newcomers will help reduce
barriers and support newcomers. The budget proposed to reallocate $27.5 million over five
years, starting in 2017-2018, and $5.5 million per year thereafter from Employment and
Social Development Canada’s existing resources to this strategy. The strategy will:
•
Improve pre-arrival supports, so that newcomers can begin the foreign credential
recognition process before arriving in Canada
•
Contain a loan program that will assist newcomers with the cost of having their
foreign credentials recognized
•
Include targeted measures to test innovative approaches to help skilled newcomers
gain Canadian work experience in their profession.
Aboriginal tax policy
In the budget, the government reconfirms its willingness to discuss and put into effect direct
taxation arrangements with interested Aboriginal governments. The government also
indicates that it supports direct taxation arrangements between interested provinces or
territories and Aboriginal governments and will continue to facilitate such arrangements.
Page 14 of 15
TaxNewsFlash – Canada
2017 Federal Budget Highlights
March 22, 2017
No. 2017-10
Previously announced measures
The budget confirms that Finance will proceed with certain previously announced
measures, as modified to take into account subsequent consultations and deliberations.
The previously announced measures are:
•
Changes to the principal residence exemption that will limit the ability of certain
taxpayers to eliminate or reduce the capital gain on the sale of their home (included
in a Notice of Ways and Means Motion tabled on October 3, 2016)
•
New information-reporting requirements where a corporation or partnership is not a
life insurance policyholder but is entitled to receive a policy benefit (announced in
the 2016 federal budget)
•
Changes to international measures, business measures, personal tax and trust
measures, SR&ED measures, and more (released as draft legislation on
September 16, 2016)
•
Proposed changes to the GST/HST rules and regulations (released as draft
legislation on July 22, 2016)
•
Measures related to the GST/HST joint venture election (previously discussed in
the 2014 federal budget and as confirmed in the 2016 federal budget).
We can help
Your KPMG adviser can help you assess the effect of the tax changes in this year’s federal
budget on your personal finances or business affairs, and point out ways to take advantage
of their benefits or ease their impact. We can also keep you abreast of the progress of
these proposals as they make their way into law.
kpmg.ca
Contact Us | KPMG in Canada Privacy Policy | KPMG On-Line Privacy Policy | Legal
Information is current to March 22, 2017. The information contained in this TaxNewsFlash-Canada is of a general
nature and is not intended to address the circumstances of any particular individual or entity. Although we
endeavour to provide accurate and timely information, there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon
such information without appropriate professional advice after a thorough examination of the particular situation.
© 2017 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Page 15 of 15