Federal Finance Consultations on Draft Tax Proposals

The Federal Department of Finance is consulting the public on draft tax legislation and regulations. There are a lot of proposed changes and, depending on the topic, different deadlines for submission. We haven’t listed all of them here, but a few that may be of interest.

Submissions due by March 7:

• Reduce by 50 per cent general corporate and small business income tax rates for businesses the manufacture zero-emission technologies;
• Expand access to the accelerated capital cost allowance for certain clean energy equipment and implement certain restrictions;
• Improve access to the Disability Tax Credit;
• Increase flexibility for plan administrators of defined contribution pension plans
• Improve administration of, and compliance with, electronic filing and certification of tax and information returns

Submissions due by April 5, 2022:

• Enhance income tax mandatory disclosure rules
• Ensure the Canada Revenue Agency (CRA) has authority to conduct audits and undertake other compliance activities
• Enhance tax reporting requirements for trusts re: beneficial ownership information
• Clarify that crypto asset mining is not considered a “supply” for GST/HST purposes

For plain language explanations of the proposed changes, the Explanatory notes of the Legislative Proposals relating to [the] Income Tax Act and Other Legislation is a helpful place to start. But for the actual text of the amendments, you’ll want to review the Legislative Proposals themselves.

What are some of the detailed proposed changes?

Audit Authorities

The audit authorities in s 231.1(1) would be amended. Subsections 231.1(a) and 231.1(1)(d) are of interest, because they were at issue in the 2019 Cameco court case. In that case the Federal Court of Appeal ruled that the Minister of National Revenue exceeded its authority when CRA auditors compelled a corporation’s employees to give answers in an oral interview.

The CRA’s statement in response to Cameco noted that “refusal to participate in oral interviews, and to provide the assistance required during the course of an audit indicates a lack of openness and transparency, and potentially a higher risk of non-compliance.” CRA remained committed to the use of oral interviews. If taxpayers choose not to participate, the statement warned that “alternative means” to verify compliance “may increase tax uncertainty and compliance burden”. 

The amendments to subsection (a) are intended to “modernize its language” and make it consistent with similar language in the Excise Tax Act, s 288(1). The ability to inspect, audit or examine in (a) would change from “any document … that relates or may relate to … information that is or should be in the books and records” to “any document, including books and records … that may be relevant in determining the obligations or entitlements of the taxpayer.”

The Cameco issue of answering questions is addressed in the amendments to subsection (d). The amendments are intended to “make clear that a taxpayer, or any other person, will be required to provide this assistance, as well as to answer these questions with respect to the administration or enforcement of the Act.”

The subsection would retain language of the taxpayer giving “all reasonable assistance” and “to answer all proper questions relating to the administration or enforcement” of the ITA but add a requirement to answer the questions in writing, in any form specified by the auditor. It would also modify the attendance requirement to include virtual meetings to answer the auditors questions orally.

Electronic Filing

The electronic filing and certification of tax and information returns section explains that proposed changes would, among other things:

• Allow employers to use electronic signatures to confirm employees met requirements for certain deductions (s.8(10) ITA)
• Require electronic payments or remittances if the amount is over $10,000

Trust Reporting

The new trust reporting requirements would not be applicable to “trusts that qualify as non-profit organizations or registered charities.”

If any of these issues are of interest or concern to you, now’s the time to share your ideas and feedback with the Department of Finance.