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Budget Secrecy & Tax Legislation: The Temptation, Risk and Power of Speculation and the Real Opportunity to Effect Positive Change


Budget secrecy in Canada has historically been deeply entrenched in the Canadian political and fiscal management process. Traditionally and to this day, our government goes to great lengths to preserve budget secrecy. Among other reasons, this could be because it prevents individuals and businesses from profiting in advance from pending budget decisions and prevents political opposition from gaining advance knowledge with which responses could otherwise be formulated.

The Budget has traditionally been accompanied by significant amendments to the income tax system. Many tax advisors have strong opinions on potential matters affecting their clients and have historically produced written articles in various publications to address concerns and issues facing advisors on behalf of their clients. The nature of social media, with its blogs and online content delivery systems seems to create a “race” favouring the first to write about changes. Perhaps in their efforts to win this race, I have also noticed something new coming from the pens of Canada’s best and brightest professionals – some rather speculative prognostications and extrapolations.

This is rather unhelpful stuff from our collective clients’ perspectives as it does not provide the basis for much meaningful analysis and discussion. Furthermore, in writing of all potential ills that may come from various potential tax policy changes, one wonders whether or not these fears will in effect become self-fulfilling prophesies.

For instance, I will point to the capital gain inclusion rate—currently, only 50% of capital gains realized by Canadian taxpayers are subjected to tax. There exists a theoretical and perhaps socialistic argument that because capital gains are realized in greater proportion by the wealthy, that this is a tax break for the rich. In our current political environment, “tax the rich” seems to be a new theme. This is what, presumably, has led to many advisors writing articles and blogs about the looming increase in capital gains rates. In spite of the rumours and dialogue, there has been no such announcement or proclamation on the part of any government to my knowledge.

Perhaps a more refined approach to this issue would be to address the possible tax policy reasons for a reduced tax rate. After all, capital gains are generally realized by investors making investments in business and capital, very often right here in Canada. Although I am no economist, one could argue that a favourable tax rate on investments in Canada could lead to increased business investment. Such investments stimulate and drive economic growth and opportunity. Keeping the capital gains inclusion rate at 50% provides an incentive to invest capital in things that make the Canadian economy stronger, providing more jobs, and ultimately, lead to more income generation that would be taxed. If we want to speculate, perhaps the question we should ask is whether this government values investing for the future or would prefer earning tax revenue in the interim? Surely there are other approaches one could positively contribute to this particular issue, but this is not the point of my musing.

The point is to call on all Canadian tax professionals and writers to set aside our own marketing and publicity fanfares and provide something more positive to the discussion on tax changes. Where our own governments are not prepared to provide meaningful information and discussion to Canadians on tax policy issues, we could step up to fill this role. I must include myself in this very criticism and acknowledge that there are certainly those that already positively contribute to this manner. Perhaps we could work more efficiently toward providing positive tax outcomes for our clients and the Canadian economic system as a whole by building a community of positive-minded and economically sensible observers and contributors. As tax professionals we are in an excellent position to use our knowledge and experience to protect the economic interests of every Canadian.

To learn more, contact Dylan Hughes, CPA, CA, at 403.537.7658 or [email protected], or your local MNP Tax Advisor.