Ottawa, August 14, 2012
Archived - Harper Government Moving Forward With Plan for Jobs, Growth and Long-Term Prosperity
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The Department of Finance today released for consultation draft legislative proposals that would implement a range of important tax measures from Economic Action Plan 2012—A Plan for Jobs, Growth and Long-Term Prosperity.
The draft legislative proposals include the following measures:
Personal Income Tax
- Improving Registered Disability Savings Plans (RDSPs) following the review of the RDSP program in 2011.
- Including an employer’s contributions to a group sickness or accident insurance plan in an employee’s income to the extent that the contributions are not in respect of wage-loss replacement benefits payable on a periodic basis.
- Amending the rules applicable to retirement compensation arrangements to prevent certain schemes designed to inappropriately reduce tax liabilities.
- Amending the rules applicable to Employees Profit Sharing Plans to discourage excessive contributions for employees with a close tie to their employer.
Corporate Income Tax
- Expanding the eligibility for the accelerated capital cost allowance for clean energy generation equipment to include a broader range of bioenergy equipment.
- Phasing out the Corporate Mineral Exploration and Development Tax Credit.
- Phasing out the Atlantic Investment Tax Credit for activities related to the oil & gas and mining sectors.
- Providing that qualified property for the purposes of the Atlantic Investment Tax Credit will include certain electricity generation equipment and clean energy generation equipment used primarily in an eligible activity.
- Reducing the general Scientific Research and Experimental Development (SR&ED) investment tax credit rate to 15 per cent from 20 per cent.
- Reducing the prescribed proxy amount, which taxpayers use to claim SR&ED overhead expenditures, from 65 per cent to 55 per cent of the salaries and wages of employees who are engaged in SR&ED activities.
- Removing the profit element from arm’s length third-party contracts for the purpose of the calculation of SR&ED tax credits.
- Removing capital from the base of eligible expenditures for the purpose of the calculation of SR&ED tax incentives.
- Preventing the avoidance of corporate income tax through the use of partnerships to convert income gains into capital gains.
- Ensuring that transfer pricing secondary adjustments will be treated as dividends for Part XIII withholding tax purposes.
- Improving the integrity and fairness of the thin capitalization rules by:
- reducing the debt-to-equity ratio from 2-to-1 to 1.5-to-1;
- extending the scope of the thin capitalization rules to debts of partnerships of which a Canadian-resident corporation is a member;
- treating disallowed interest expense under the thin capitalization rules as dividends for Part XIII withholding tax purposes; and
- preventing double taxation in certain circumstances where a Canadian resident corporation borrows money from its controlled foreign affiliate.
- Restricting the ability of foreign-based multinational corporations to transfer, or “dump”, foreign affiliates into their Canadian subsidiaries, while preserving the ability of these subsidiaries to undertake legitimate expansions of their Canadian businesses.
- Phasing out the Overseas Employment Tax Credit.
The measures listed above apply as indicated in Budget 2012, generally on March 29, 2012. In a few cases, modifications to the measures have been made that will apply as of today’s date. References to “Announcement Date” in the draft legislative proposals are to be read as references to today’s date. Explanatory notes are included with the draft legislative proposals.
Interested parties are invited to provide comments on the draft legislative proposals by September 13, 2012. Please send your comments by email to ConsultationB2012taxfirstname.lastname@example.org or by post to:
Tax Policy Branch
Department of Finance
140 O’Connor Street
For further information, media may contact:
Mary Ann Dewey-Plante
Office of the Minister of Finance
Department of Finance
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