OTTAWA—Flying under the radar of Budget 2023’s spending and deficits are a couple of tax hikes on wealthy individuals and corporations that were telegraphed a year ago. But analysis shows that such tax hikes can impact people who are simply using well-established tax deductions, and a tax expert says they can also adversely impact business investment.
These measures are part of a section where the feds say they are working toward a “fair tax system.”
Budget 2022 planted the seeds for changes to Canada’s alternative minimum tax (AMT) on wealthy individuals, saying it had not been substantively updated since its introduction in 1986. Along with that, the government launched a public consultation on the global minimum tax of 15 percent on multinational corporations, championed in 2021 by the Organisation for Economic Co-operation and Development (OECD).
And now in Budget 2023, they are realities.
A senior government official told The Epoch Times that the way the government is structuring the AMT for wealthy individuals is what is novel in this budget, and that the revenues expected to be generated are more elevated than what they would be by simply trying to close tax loopholes.
“They’ve achieved what they said was their objective of making the AMT have more bite,” said Brian Ernewein, senior adviser on national tax with KPMG Canada, in an interview.
As a result of the AMT provision, Budget 2023 expects revenues to increase by a total of $2.95 billion over the next five fiscal years, from 2023–24 to 2027–28.
“I would guess that the revenue estimates on the AMT are relatively reliable,” Ernewein said.
A question raised was that with tax increases on the wealthiest Canadians, the revenue might be “slippery” in that this income group can relocate or find other ways to pay less tax.
The senior government official said, “We’re confident of those numbers.”
AMT Details
Budget 2023 proposes to raise the AMT rate from 15 percent to 20.5 percent and to raise the basic AMT exemption from $40,000 to $173,000. This increases the income level necessary to pay the AMT.
“This would result in a tax cut for tens of thousands of middle-class Canadians, while the AMT will more precisely target the very wealthy,” according to the budget.
In a C.D. Howe Institute study published a day before the March 28 release of Budget 2023, Ernewein and two colleagues looked at potential ways high-income earners can lower their effective tax rate. They determined that capital gains lie at the heart of the issue.
