A re-elected Liberal government would impose a 15% minimum tax on Canada’s highest earners, limiting their ability to reduce what they pay through tax planning.
The Liberal’s fully costed platform included a number of tax measures focused on wealthy companies and individuals, and measures to strengthen consumers’ protection from financial institutions.
While the Liberals had already announced policies around housing and taxing profits for large financial institutions, they only released their full platform for the Sept. 20 election on Wednesday, a couple of weeks after the Conservatives and the NDP.
The Liberals’ minimum tax rule would ensure that top earners (those earning more than $216,511 in 2021) pay at least 15% tax each year, the same rate as those earning less than $49,000.
Canada already has an alternative minimum tax, which limits the tax deduction available from certain incentives.
The tax rate on income above $216,511 is 33%. The Liberals’ minimum tax would remove high earners’ “ability to artificially pay no tax through excessive use of deductions and credits,” the platform said. The tax would raise $1.7 billion over five years, according to the party’s projections.
The proposal fell within a section of the platform dedicated to “a fair tax system.” Other measures included the higher corporate tax rate for banks and insurers on profits above $1 billion announced last week, and the luxury tax on expensive vehicles proposed in the 2019 campaign but never implemented.
The Liberals would also increase Canada Revenue Agency resources by up to $1 billion per year to combat “aggressive tax planning and tax avoidance” and close the tax gap. (The NDP also pledged to boost funding for the CRA, but did not provide a figure.)
The tax on bank and insurer profits wasn’t the only Liberal measure targeting financial institutions.
The Liberals pledged to establish “a single, independent ombudsperson for handling consumer complaints involving banks, with the power to impose binding arbitration.”
The Ombudsman for Banking Services and Investments (OBSI) has lost relevance as large banks have set up their own dispute resolution services. While OBSI still handles disputes related to investments, it has no power to enforce its compensation recommendations, something that has frustrated investor advocates for years.
The Liberals also said they would enhance the Financial Consumer Agency of Canada’s power to review the fees charged by banks “and impose changes if they are excessive,” and move forward with a plan to launch open banking in 2023.
The Conservative platform also featured measures aimed at financial institutions. The Tories pledged more transparency on investment management fees and called on the Competition Bureau to investigate bank fees.
The Liberal platform includes about $78 billion in new spending over the next five years and around $25.5 billion in new revenue. Using the Parliamentary Budget Office’s August projections, the Liberals forecast the $156.9-billion deficit in 2021–22 falling to just over $32 billion in 2025–26, with the debt-to-GDP ratio declining from 48.5% to 46.5% over the same period.
The platform also features a $15-billion risk adjustment fund for Covid.
Other measures in the Liberal platform include:
- A “career extension tax credit” for working seniors. Canadians over 65 who earn at least $5,000 at their jobs will be able to eliminate tax payable on a portion of their income and receive a tax credit of up to $1,650. (Quebec has a credit like this for people over 60.)
- An “EI career insurance benefit” for people who have worked continuously for the same employer for five or more years and are laid off when the business closes. The benefit will kick in when regular EI ends, providing an additional 20% of insured earnings in the first year following the layoff, and an extra 10% in the second year (or almost $16,900 over two years).
- An extension of the home expense deduction for those working from home, with the deductible amount increased to $500 without receipts.
- A Canada disability benefit, a direct monthly payment for low-income Canadians with disabilities aged 18 to 64 that works like the guaranteed income supplement and the Canada child benefit.
- A new national agency to investigate financial crimes that brings together the RCMP, rhe Financial Transactions and Reports Analysis Centre and the CRA.
- A modernized general anti-avoidance rule regime to prevent banks and insurance companies from using “tiered structures as a form of corporate tax planning that flows Canadian-derived profit through entities in low-tax jurisdictions in order to reduce taxes back in Canada.”
- The elimination of flow-through shares for oil, gas, and coal projects to promote the transition to a net-zero economy.
- A one-time tax deduction for health care professionals in first three years of practice of up to $15,000.
- An expanded Canada Caregiver Credit which would become a refundable, tax-free benefit.
- A Labour Mobility Tax Credit to allow workers in the building and construction trades to deduct up to $4,000 in eligible travel and temporary relocation expenses.
- A 15% tax credit for up to $500 in home appliance repair costs.