Canada’s federal budget 2014

By Albert Baker

As part of its annual pre-budget consultation process, the House of Commons Standing Committee on Finance has invited Canadians to share their recommendations for the 2014 federal budget.

To ensure that Canada is a stronger, more competitive nation our recommendations for Budget 2014 have been submitted to the House of Commons Standing Committee on Finance and are summarized below.

Innovation and commercialization

The Government needs to focus on innovation and commercialization in order for Canada to achieve sustained economic growth. As discussed in our series The future of productivity, enhancement to productivity is essential to ensuring Canada’s prosperity. To this end, we recommend the Canadian government the following:

• Make the scientific research and experimental development (SR&ED) investment tax credit (ITC) refundable to all corporations doing business in Canada;
• Introduce an angel tax credit to enhance financial support for early-stages higher-risk of innovation development;
• Consider introducing a patent box model to encourage companies to retain and commercialize patents in Canada.

An aging population with a skills shortage

Canada can drive economic innovation and improve its productivity by attracting and retaining skilled workers. That key focus could help offset the country’s aging population and skills shortage through the following measures: Enhancing the competitiveness of the personal tax regime by increasing the threshold at which the top rate of tax begins; Increasing overall immigration targets and sharpening existing immigration programs to encourage immigration to Canada of educated, productive and innovative individuals.

Competitiveness

We encourage the Government to balance the need to prevent Base Erosion and Profit Shifting (BEPS) with the need to maintain Canada’s competitiveness. Unilateral actions which could adversely impact competiveness should not be undertaken unless Canada’s trading partners are in fact implementing corresponding changes at the same time. In light of the recent global focus on tax transparency and BEPS, we recognize that Canada has taken necessary steps to address tax evasion and will be party to certain G20 initiatives. However, we are concerned about the broad scope of the Stop International Tax Evasion (SITE) program introduced in the 2013 budget. The concept of tax evasion is often inappropriately associated with tax avoidance. The two concepts are very different: tax evasion is a crime while tax avoidance in and of itself, is not. We believe that to conflate tax avoidance with illegal tax evasion is inappropriate and misleading not only within the SITE program but in general. We recommend the SITE program be limited to tax evasion.

Albert Baker is the National Tax Policy Leader and the National Quality & Risk Leader. He specializes in structuring M&A deals, corporate financing and corporate reorganizations.

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