The results are in: The Liberal Party formed the minority government as of September 21, 2021.

While they made many promises during the election campaign to introduce a variety of new tax changes that could significantly affect individuals and businesses in Canada, it’s possible that some of these pledges will now be modified before they are introduced. Specifically, the Liberal Party government may need to negotiate with another federal party’s priorities to win the support required to get certain measures through Parliament and passed into law.

Below you’ll find a summary of the potential new taxes, tax deductions, and tax credits.

Corporate taxes and incentives

  • Increase the corporate income tax rate on banks and insurance companies that earn more than $1 billion per year to 18% (from 15%) on all earnings over $1 billion. The potential additional revenues have been projected to be approximate $1.2 to $1.3 billion/year.
  • A temporary Canada Recovery Dividend to be paid by these banks and insurance companies. This measure is expected to provide $1.3 billion to $1.5 billion in new revenues/year, over the next four years.
  • Canadian-controlled private corporations (CCPC) immediately expense up to $1.5 million of eligible investments, as proposed in the 2021 federal budget. According to the budget, this immediate expensing would be available for eligible property acquired on or after April 19, 2021, and available for use before 2024.
  • Reforming the Scientific Research & Experimental Development (SR&ED) Program by aligning eligible expenses to current innovation and providing additional support for companies based on risk.

COVID-19 support

  •  Extended temporary wage and rent support of up to 75% of expenses for Canada’s tourism industry.
    • This measure is described as an extension of the Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) from October 24, 2021, to May 31, 2022, for businesses with at least a 40% revenue loss in the following industries: hotels, tour operators, travel agencies, convention centres and festivals. The subsidy rate will be equal to the revenue loss compared to pre-COVID levels, up to a limit of 75%.
  • Extend the Canada Recovery Hiring Program (CRHP) to March 31, 2022
  • Introduce a refundable tax credit for small businesses to make it easier for them to invest in better ventilation.

International tax

  • Work with international partners to implement a global minimum tax.
  • Modernize the general anti-avoidance rule regime to focus on economic substance and restrict the ability of federally regulated entities, including financial institutions such as banks and insurance companies, to use tiered structures as a form of corporate tax planning that flow Canadian-derived profits through entities in low-tax jurisdictions to reduce taxes in Canada.

Personal tax

  • Create a minimum tax rule of 15% for individuals with income in the top tax bracket removing excessive use of deductions and credits.
    • This tax would be calculated as 15% of taxable income and will replace the net federal tax where the net federal tax is lower than the minimum tax.
    • Foreign income taxes paid will reduce the minimum tax payable, and the refundable Quebec abatement will be calculated based on the minimum tax amount when it applies.
    • This measure is estimated to provide additional revenues of approximately $400 million per year. It is not yet clear how the new minimum tax would interact with the existing alternative minimum tax.
  • Implement a luxury tax on certain new cars, boats and private aircraft, as outlined in the 2021 federal budget
  • Expand the Canada Worker’s Benefit and continue to allow secondary earners to exclude up to $14,000 of their working income when income-testing the Canada Workers Benefit so that families can receive up to $2,400
  • Allow certain health professionals establishing a practice to deduct up to $15,000 over their first three years of practice
  • Extend the simplified Home Expense deduction through the 2022 tax year and increase the deductible amount to $500 (from $400)
  • Amend Canada’s tax credit system including changes to:
    • Canada Caregiver Credit into a refundable, tax-free benefit o Increase the Home Accessibility Tax Credit to $20,000 (from $10,000) to provide up to an additional $1,500
    • Eligible Educator School Supply Tax Credit to 25% (from 15%) and expand eligibility to include tech devices
    • Medical Expense Tax Credit to include costs reimbursed to a surrogate mother for IVF expenses
    • Introduce a Labour Mobility Tax Credit to allow those in construction trades to deduct up to $4,000 in eligible travel and temporary relocation expenses
    • Introduce a Career Extension Tax Credit for seniors 65 and over who earn a minimum of $5,000 of working income (maximum credit available of $1,650)
    • Undertake a review of access to the Disability Tax Credit, CPP-Disability and other federal benefits and programs.
  • Move forward with a plan to boost the OAS by 10% next year for seniors 75 and over
  • Increase the GIS by $500 for single seniors and $750 for couples, starting at age 65
  • Increase the CPP and QPP survivor’s benefit by 25%
  • Provide a direct monthly Canada Disability Benefit payment for low-income Canadians with disabilities.

Education, training and jobs

In its election platform, the Liberal Party promised to:

  • Establish new provisions to ensure employment hours working for digital platforms count toward EI and CPP while also making these platforms pay associated employer contributions
  • Introduce a new EI benefit for self-employed individuals that provides unemployment assistance comparable to EI for up to 26 weeks
  • Make reforms to the EI system that consider artists, cultural workers and seasonal workers
  • Establish an EI Career Insurance Benefit for certain laid-off long-term employees that kicks in after regular EI ends and provides an additional 20% of insured earnings in the first year following the lay-off and an extra 10% in the second year.

Housing measures

  •  Extend its previously proposed tax on non-resident, non-Canadian owners of vacant, underused housing to include foreign-owned vacant land within large urban areas. Previously, a 1% “Underused Housing Tax” was announced in the 2021 federal budget, proposed to begin January 1, 2022.
  • Establish an “anti-flipping” tax, that would require properties to be held for at least 12 months. This measure would remove the principal residence exemption for individuals that sell their principal residence within 12 months of purchase, or transfer title, and treat the gains as taxable capital gains. There are several exemptions from this proposal, including:
    • The sale of vacant land,
    • The sale of certain destroyed condemned or damaged property,
    • Death, divorce, separation, serious illness/injury or change of employment during the 12-month period.
  • Introduce a tax-free First Home Savings Account to allow Canadians under 40 to save up to $40,000 toward their first home and withdraw it tax-free, with no requirement to repay.
    • Contributions to this account count towards an individual’s RRSP contribution limit and indicate that funds can be transferred from an individual’s RRSP.
    • Although all the funds in the account can be withdrawn tax-free to purchase a first home and do not have to be repaid, at least 50% of the funds withdrawn will have to be invested for at least four years and no funds will be allowed for withdrawal within a year of being contributed.
  • Increase the First-Time Home Buyers Tax Credit to $10,000 (from $5,000)
  • Introduce a Multigenerational Home Renovation tax credit of 15% for up to $50,000 in renovation costs for families to add a secondary unit to their home for immediate or extended family members
  • Require landlords to disclose the rent received pre- and post-renovation on their tax filings and implement a proportional surtax on excessive increases
  • Review the tax treatment of large corporate owners of residential real estate (such as REITs)
  • Move forward with a publicly accessible beneficial ownership registry.

Environmental measures

  • Continue to put a rising price on pollution
  • Move forward on applying Border Carbon Adjustments potentially on imports of steel, cement, aluminum and other emissions-intensive industries, in collaboration with the U.S. and the EU
  • Eliminate fossil fuel subsidies by 2023
  • Develop additional investment tax credits for renewable energy and battery storage solutions
  • Increase the Mineral Exploration Tax Credit for certain minerals essential to the manufacturing of clean technologies, such as batteries
  • Introduce an investment tax credit of up to 30% for a range of clean technologies including low carbon and net-zero technologies
  • Introduce a 15% tax credit to cover the cost of home appliance repairs performed by technicians (up to $500)
  • Issue federal green bonds
  • Eliminate flow-through shares for oil, gas and coal projects.

Administrative measures

  • Significantly increase the resources of the CRA (up to $1 billion per year) to combat aggressive tax planning and tax avoidance
  • Modernize the General Anti-Avoidance Rule (GAAR) regime.

Other measures

  • Move forward with a national tax on vaping products and require tobacco manufacturers to pay for the cost of federal public health investments in tobacco control.

While most of the proposals here are items from the election platform, we do expect to see many of them become part of future budgets. As with all minority governments, negotiations will be required. Watch for future budget updates for the specific tac changes and their implications.