From: 1revenuecanada@canada.com   
      
   Election 2015: How Proposed Tax Measures Could Affect You And Your Business:   
   CRA SOTW   
      
   Last Updated: October 12 2015   
   Article by Grant Thornton    
   Grant Thornton LLP   
      
   As the federal election draws closer, the political parties are promoting   
   their platforms which encompass a wide range of tax related promises. Some of   
   these promises seem easy enough to understand, but others could significantly   
   impact the amount of    
   taxes privately held businesses and each of us can expect to pay going forward.   
      
   The focus of this article is to comment on the positions that the three key   
   political parties have taken as of September 18, 2015 with respect to a number   
   of tax related measures.   
   Taxation of capital gains   
      
   One issue that could have widespread tax implications would be to change the   
   current taxation of capital gains. While there does not appear to be any   
   mention of this by the Conservative and Liberal parties, the NDP Policy Book   
   notes that New Democrats    
   believe in "taxing capital gains at the same rate as salaries or wages."   
   Although this Policy Book has recently been removed from the NDP's website in   
   preparation for the release of a full campaign platform, we have nevertheless   
   drawn from certain    
   statements in the book.1   
      
   Currently, one of the key pillars of our tax system is the preferential tax   
   treatment afforded in respect of gains on the disposition of capital property.   
   Capital gains first started to be taxed in 1972, in part, to make up for doing   
   away with    
   inheritance taxes. Prior to that time, all capital gains were tax-free. While   
   the Carter commission had recommended 100% taxation, capital gains were only   
   taxed at 50% when they started to be taxed in 1972. This inclusion rate was   
   increased to 66.67% in    
   1988 and 1989, to 75% in 1990, reduced to 66.67% in February, 2000, and   
   reduced again to 50% in October 2000, where it has remained to this day.   
      
   There are many reasons to retain preferential tax treatment for capital gains.   
   First of all, it encourages taxpayers to take risks with their accumulated   
   capital, thereby growing the economy in the process. The higher the tax rates   
   on capital, the more    
   job-creating investments are deterred. Second, it accounts for the fact that   
   there is an inflation component associated with the growth in an asset's value   
   that should not be subject to tax. Finally, and more importantly -   
   particularly with respect to    
   share values - where income is retained in a corporation and not distributed   
   to the shareholders as dividends, the growth in corporate retained earnings   
   will result in a corresponding increase in the company's share value. If the   
   increase in the value of    
   the share is subsequently taxed at 100%, the shareholder will effectively be   
   subject to double tax on the same income. The advantages of low capital gains   
   taxes have led many economists to call for ending these taxes altogether.   
   Eleven OECD countries    
   today don't tax long-term capital gains at all.   
      
   Corporate tax rates   
      
   The federal general corporate tax rate is currently 15% and the small business   
   rate is 11%.2 The Conservatives plan to reduce the small business rate from   
   11% to 9% over a four year period. The New Democrats are also in favour of   
   this decrease and the    
   Liberals have stated that they are in favour of tax breaks for small   
   businesses, but want to ensure that these don't primarily benefit the wealthy.   
   As far as the general corporate income tax rate goes, the New Democrats have   
   proposed to increase the rate    
   by two percentage points, to 17%.   
      
   Personal tax rates   
      
   While the Conservatives plan to keep personal income tax rates unchanged, both   
   the Liberals and the New Democrats are in favour of personal tax changes. The   
   Liberals have specifically stated that they will reduce the current 22% tax   
   bracket to 20.5%3 and    
   will create a new tax bracket of 33% for taxable income over $200,000.   
   Currently, the top federal rate of personal tax is 29%. The New Democrats have   
   indicated that they will not raise personal income tax rates, and they believe   
   in targeting tax    
   reductions to help the middle class, working families, and the poor.   
      
   Other measures   
      
   The three main parties also have varying positions on a number of other key   
   personal tax issues.   
      
   Tax Free Savings Account (TFSA)   
      
   Although the Conservatives have increased the annual contribution limit for   
   TFSAs to $10,000 from $5,500, both the Liberals and the New Democrats have   
   stated that they will reduce the TFSA contribution limit back down to $5,500.   
      
   Family tax cut   
      
   Commencing with 2014 personal income tax returns, the Conservatives   
   implemented a "family tax cut" that allows couples with children under age 18   
   to notionally split up to $50,000 of income, but capping the non-refundable   
   benefit at $2,000 per year. Both    
   the Liberals and New Democrats would cancel this measure. Note that this   
   incentive has nothing to do with pension income splitting for seniors, which   
   has been available for a number of years. All three parties are in favour of   
   retaining this measure.   
      
   Other benefits for families with children   
      
   Effective for 2015, the Conservatives have increased the Universal Child Care   
   Benefit (UCCB) from $100 to $160 a month for children under age six. They have   
   also added a new monthly benefit of $60 for children age six to 17. The UCCB   
   benefit is taxable,    
   generally to the lower income spouse. However, along with this increase in the   
   UCCB, the tax credit for children under age 18 is being eliminated. This   
   credit saved approximately $338 in federal tax per child in 2014.4 On this   
   basis, a family with two    
   children, one under age six and one over age five would have received $1,200   
   in 2014, but will receive $2,640 in 2015. Assuming the recipient's marginal   
   rate of tax is 30%, the net after-tax cash retained for 2014 would have been   
   $1,5165 (factoring in    
   the benefit of the child tax credit for each of the two children). For 2015,   
   this same family will retain $1,8486 after-tax.   
      
      
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