» Tax Consulting and Related Services »
June 13, 2024

Tax Tips

The 2012 Federal Budget
Subject: Federal Budget
Number: 12-07
Date: 3/2/2012
Your TSG members will be reviewing and analyzing the 2012 Federal Budget

The 2012 Federal Budget will be released on March 29, 2012.  The release of the Federal Budget is always an important time for tax practitioners and taxpayers given that significant tax proposals are usually announced. 

The contents of the Federal Budget are always a carefully guarded secret by the Department of Finance so as to ensure that no one is at a significant advantage or disadvantage as a result of knowing the contents at a time earlier than the general public.  Notwithstanding, there are usually some indications as to what the Federal Budget might include.  While none of the members of the Tax Specialist Group (“TSG”) have inside knowledge of what the 2012 Federal Budget might include, some signs of its contents have already been revealed.  The following are some of our predictions.  Please exercise caution with what follows since it is pure speculation. 

It appears that the government is intent on changing the Scientific Research and Experimental Development Tax Credit program.  With the release of the Jenkins report in October, 2011 it appears that the government will begin to make significant changes to this often criticized tax credit. 

Will we see tax rate changes?  Perhaps…, but any changes will likely be minor given that the economic recovery is still underway.  It may not be the right time to increase tax rates. 

Will we see donation tax credit changes?  Many of the recent Federal Budgets have contained targeted changes to the tax system for charities and donors.  Most changes have been significant improvements. Some, however, have been anti-avoidance rules designed to stop certain abusive “strategies” or charitable tax shelters from being effective.  There have been representations made to Parliament recently on how changes to the tax system can incent donations to charities so more changes may be coming.

Will we see additional anti-avoidance measures?  The last two Federal Budgets contained significant anti-avoidance measures (like the collapse of deferrals for corporate members of partnerships, “kiddie-tax” changes, changes to charitable donation tax credits when donating flow-through shares and aggressive tax reporting proposals) so it would not be surprising to see more measures introduced.

Will we see changes to Employees Profit Sharing Plan Trusts (“EPSPs”)?  Likely.  The last Federal Budget announced that the government was reviewing EPSPs and was seeking public input on a number of issues.  The public input period has ended and the 2012 Federal Budget may be the time for the government to “test the waters” by releasing draft proposals.

We are still waiting for legislation that will allow taxpayers to challenge the CRA’s determination of eligibility for the “Disability Tax Credit” (“DTC”) in court.  Currently a person cannot challenge the CRA’s determination in court unless the denial affects taxes payable.  For low income people with disabilities or mental infirmities, the eligibility for the DTC may not affect their tax bill but it determines whether the person can have a Registered Disability Savings Plan.  The government stated that it would introduce legislation to allow redress to the courts in these situations but no proposals have been released.

Your TSG members will be reviewing and analyzing the 2012 Federal Budget and will be available to answer your questions.

TAX TIP OF THE WEEK is provided as a free service to clients and friends of the Tax Specialist Group member firms. The Tax Specialist Group is a national affiliation of firms who specialize in providing tax consulting services to other professionals, businesses and high net worth individuals on Canadian and international tax matters and tax disputes.

The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.