Take 2: New Complex Tax Rules, Short Comment Periods

If the date July 18, 2018 rings a bell it should: it marked the one-year anniversary of Morneau’s controversial small business tax proposals. This year, mid-summer tax complexity is again in the news, as Finance Canada released two important new tax documents for Canadians on July 27: the Draft Sales and Excise Tax Legislative and Regulatory Proposals and the Draft Income Tax.

The Draft Sales and Excise Tax Legislative and Regulatory Proposals impact the GST/HST holding corporation rules, the excise refund for diesel used for certain purposes, the GST/HST rebate for printed books for qualifying public service bodies, information sharing in criminal matters, and reassessment periods for compliance orders.

The Draft Income Tax Legislative Proposals are designed to improve access to the Canada Worker’s Benefit, and also affect the deductibility of employee contributions under the Quebec Pension Plan, the reporting requirements for trusts, cross-border surplus stripping for partnership and trusts, more complex rules on the holding of passive investment income, and reassessment periods, among other provisions.

Canadians are invited to submit comments on both of these proposals until September 10, 2018. This, despite protests from tax practitioners and business owners on the short comment periods allowed on the very complex corporate tax changes announced last year.  The Finance Department also initiated consultations on two other aspects of the GST/HST holding corporation rules, with an accompanying consultation paper. Comments on this paper must be made by September 28, 2018.

Further, in a statement from a G20 Summit in July, Finance Minister Morneau indicated that Canadians can expect competitiveness issues to be addressed with this fall’s Economic Statement, which will be covered at Knowledge Bureau’s CE Summits in early November. The opportunity for advisors will be to learn how to help their clients assess the impact of uncertain trade relations and Canada’s high tax rates, on year-end personal and business tax and wealth planning.

Mr. Morneau noted in his statement, that his priority will be lowering the cost of new investment rather than cutting tax rates overall, despite the pressures posed to match the newly implemented rates south of the border.

At the same time, he announced the government will invest $16.8 million in the Global Sharing Platform for Tax Administrations, which will have to goal of helping countries around the world to deal with the challenge of international tax evasion and aggressive tax avoidance. This platform will provide governments around the world access to virtual classrooms, networks of experienced tax administrators and a growing library of global best practices, according to the July release.

Mr. Morneau has also teased that other focal points of the Fall Economic Statement will include NAFTA renegotiation, and plans to build Canada’s oil pipeline; in an effort to enhance Canada’s competitive stance. This Economic Statement is also widely expected to clear the path for another Bank of Canada rate hike this fall, making debt management a key issue for advisors to discuss with clients, especially pre-retirees, now until year-end.

Additional educational resources:

Considering the focus of the fall economic statement, tax and financial advisors will need to be up to speed on the latest issues impacting their corporate clients. Knowledge Bureau’s fall CE Summits will help you do just that, with workshops focusing on year-end planning for investors and small businesses. Reserve your spot today in one of four Canadian cities – Winnipeg on November 2, Vancouver on November 5, Calgary on November 6, or Toronto on November 7. We also recommend the Business Valuation for Advisors certificate course, which can provide needed credits towards a Master Financial Advisor – Business Services Specialist designation and the Debt and Cash Flow Management Course as a professional development choice this fall.



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