Personal Taxes

Private tax measures: what does the long run maintain? – Tax


Personal tax measures: what does the future hold?

October 26, 2021

O’Sullivan Estate Lawyers LLP

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It is probably an understatement that there is a sense of concern among taxpayers around the world about what action governments will take to increase tax revenues to pay for the pandemic, and also to respond to the growing wealth inequality that is exacerbating the pandemic Has.

A brief overview of what governments are doing provides context, including in the Canadian context, of what our newly elected Liberal minority government might do.

South of the border there are a number of proposals aimed specifically at the rich that have been submitted by the Biden administration and are currently under scrutiny by Congress, and it remains to be seen what will be put into law. The House Ways and Means Committee recently approved tax regulations that include, but are not limited to:

  • Increase the highest income tax rate from 37% to 39.6% for US persons with annual worldwide income greater than $ 400,000 and a 3% surcharge on taxable income over $ 5 million;

  • Increase in capital gains ratio from 20% to 25% for individuals with annual income greater than $ 500,000;

  • Taxing capital gains when transferring assets from certain trusts and limiting many common tax planning strategies using trusts to minimize tax in estate planning; and

  • Lowering the U.S. inheritance tax exemption from $ 11.7 million to the $ 5 million base set in 2010, which would bring the inflation rate to around $ 6.020 for 2022.

Given the current uncertainty south of the border, the idea of ​​a wealth tax should still be considered, but has not caught on in the current proposals. A number of other countries have now imposed one or are considering it. Singapore, for example, is currently considering how to expand its wealth tax system to address the challenges of inequality and climate change in the face of a rapidly aging population that it believes will increase income inequality.

In 2018, the Organization for Economic Co-operation and Development (OECD) published a comprehensive report entitled The Role and Design of Net Wealth Taxes in the OECD, recognizing that there are signs of growing wealth inequality and strong arguments to tackle them gives through the tax system. However, she concluded that there are limited arguments in favor of introducing a wealth tax when a country already has broad-based income taxes and well-designed inheritance and gift taxes.

Recently, on May 11, 2021, the OECD published a report entitled Inheritance Taxes in OECD Countries, which found strong arguments in favor of the fairness of an inheritance tax on the value of the assets received by a beneficiary in order to address increasing wealth inequality in the country tackle the next ten years.

What is the forecast of what the government will do in the area of ​​personal tax, and will it be in the December 22nd?

Part of the liberal electoral platform was a tax of at least 15% on high earners, which allegedly has the ability to artificially pay little or no tax through excessive use of credits and deductions, as well as a proposed luxury tax on vehicles and boats.

Will there be proposals to increase taxes or possibly even introduce a wealth tax or an inheritance tax?

The jury is undecided, but the NDP’s support could be critical in passing laws that could affect tax proposals, and the NDP advocated higher tax rates, a wealth tax and an increase in the capital gains inclusion rate of 50 on its voting platform % to 75%. The necessary support of the NDP in the house could steer tax measures in this direction.

However, US and global initiatives could also have a significant impact on Canadian tax policy and its future direction, which cannot be viewed in isolation as much of the world is facing similar problems and engaging in the growing global discussion due to the pandemic .

– Margaret O’Sullivan

The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.

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