A balancing act: KPMG's take on the 2015 federal budget
02 Apr, 2015, 11:15 ET
TORONTO, April 2, 2015 /CNW/ - It's an election year and the 2015 federal budget will likely set the stage for the Conservative government's tax and fiscal policies for their upcoming campaign. Budget day is set for April 21, and KPMG anticipates targeted tax changes for both individuals and businesses.
The Conservative government has stated that it plans to present a balanced budget. We also expect the budget to continue eliminating "tax loopholes" and introduce tax base tightening measures that target specific tax planning that the government considers unacceptable.
The government may also act on its remaining 2011 election promises to provide a variety of personal tax breaks that it said would be introduced once the budget was balanced, including:
- Increasing the annual contribution limit for Tax Free Savings Accounts (TFSA) to $10,000 from $5,000.
- Introducing an adult fitness tax credit for up to $500 in eligible expenses.
What else should Canadians expect?
This year's report by the House of Commons Standing Committee on Finance, entitled "Towards Prosperity: Federal Budgetary Priorities for People, Businesses and Communities," highlights more budget considerations and potential tax changes. The Finance Committee's reports often form the basis for the government's budget proposals. The Finance Committee recommends to the Minister of Finance that the following tax changes be included in this year's budget:
- Business Tax:
- Patent box: To continue to foster an environment of innovation, the federal government should consider assisting small and medium-sized businesses that wish to access the Scientific Research and Experiential Development investment tax credit. One way to accomplish this could be to introduce a "patent box" regime, which would reward innovative companies with a lower corporate tax rate on profits earned through the commercialization of their patents in Canada.
- Accelerated Capital Cost Allowance (CCA): Extending the accelerated CCA or creating a similar tax incentive is recommended. The government may also explore the possibility of extending the accelerated CCA in order for some Canadian industries, such as manufacturing, energy and clean technology, to achieve a competitive advantage in North America.
- Personal Tax:
- Charitable giving: The government may explore measures that would prompt higher levels of charitable donations, such as providing an enhanced charitable donation tax credit to individuals who donate an amount in a given year that exceeds their donation in the preceding taxation year.
- Retirement security: The government should examine ways to help Canadians save for long-term care and uncover innovative ways to financially support retirees, such as modifications to registered retirement income fund withdrawal rates.
These predictions come on the heels of the government's decision late in 2014 to introduce the Family Tax Cut package, which is a form of notional income splitting that can result in savings of up to $2,000 for certain families with children under the age of 18, starting in 2014. The government has also increased the maximum amounts individuals can claim under the Child Care Expense Deduction, increased the Universal Child Care Benefit and eliminated the Child Tax Credit in 2015.
KPMG on the Hill
KPMG tax professionals will be on the Hill, providing insight and commentary about the impact of the 2015 budget on individuals and businesses in Canada. Highlights will be available late in the afternoon on budget day at kpmg.ca/budget2015.
"The government has been focussed on balancing the budget for 2015, a year when Canadians will head to the polls. We will see if its focus on tax fairness and tax tightening measures has paid off and how the financial difficulties experienced in our energy sector have impacted the government's ability to balance the books."
Elio Luongo, Canadian Managing Partner, Tax, KPMG in Canada
KPMG tax professionals from Victoria to St. John's and all points in between are available to provide regional insight leading up to the federal budget and after it is delivered. With more than 30 offices across Canada our regional leaders can comment on the budget's local impact for Canadians and their businesses.
Federal budget homepage
@KPMG_Canada - #bdgt15
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KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG member firms around the world have 162,000 professionals, in 155 countries.
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SOURCE KPMG LLP
For further information: Briana D'Archi, KPMG in Canada, (416) 777 8169, [email protected]
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