The Harper government will continue to tighten the tax system by closing loopholes and introducing a range of tax measures, predicts KPMG.

Also, the government may comment on the OECD’s push for greater tax transparency and its ambitious Action Plan on Base Erosion and Profit Shifting (BEPS), which Canada and other G20 leaders signed in July 2013.

“With the government’s goal to balance the budget by next year, we don’t anticipate major increases in spending,” says Elio Luongo, Canadian managing partner, Tax, KPMG in Canada. “We still expect to see a range of tax measures as the Conservatives maintain their focus on tax fairness and tax tightening measures.”

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He adds, “We may also see some signals of things to come such as joint filing by spouses, business initiatives on training incentives for young apprentices and more changes to certain incentive programs and deductions.”

And since Canada has been in talks with the U.S. government to enter into an inter-governmental agreement (IGA) to streamline FATCA compliance for Canadians, the budget may also include details to simplify practical implementation and reduce costs.

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KPMG predicts the following will also be included in the budget:

  • Business tax changes – expand the accelerated capital cost allowance to encourage the construction of domestic infrastructure in the oil and gas sector; examine tax provisions in real estate to allow small investors to defer tax on income from the sale of property; promote tax incentives to encourage the development and use of clean energy generation; consider making permanent the temporary 15% Mineral Exploration Tax Credit, to support junior mineral exploration.
  • Personal tax changes – change the tax credit for charitable donations to facilitate greater charitable giving; continue implementing PRPPs; explore tax incentives to assist skilled workers in enhancing their mobility.

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The Finance Committee also recommends the government find ways to simplify the Income Tax Act, ensure the timely assessment of tax returns, and explore the possibility of permitting consolidated reporting.

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