Federal government needs to replenish coffers following COVID-19
Accounting and consulting firm Raymond Chabot Grant Thornton says the pandemic has led to extraordinary levels of debt that can only be addressed with exceptional budgetary measures.
In its pre-budget submission to the federal and Quebec finance ministers, the firm outlines measures the governments should take to replenish government coffers—without raising taxes – and without being detrimental to future generations.
The following four recommendations would only be in place on a temporary basis, to increase government revenue and offset pandemic-related debt:
- allow taxpayers to withdraw funds from their registered retirement savings plan (RRSP) over the next 24 months and pay a reduced tax rate of 7.5 per cent on these funds
- allow taxpayers to elect to withdraw funds from their holding corporations over the next 24 months and pay a reduced tax rate of 10 per cent (fixed rate) on dividends
- allow taxpayers to elect, within the next 24 months, to immediately pay capital gains tax on assets that have appreciated in value. Taxpayers making this election would benefit from a reduced tax rate of 7.5 per cent (fixed rate) on their taxable capital gains.
- allow taxpayers to elect, within the next 24 months, to immediately pay two years of tax instalments. Taxpayers making this election within the specified time frame would be credited an amount equivalent to an as-yet-undetermined percentage of their instalment amount (for example, five per cent or 10 per cent) to be applied against income tax owing two years after the instalment was made.
Measures are ambitious and drastic
“We know that some of our proposed measures are ambitious and will spark debate. However, we also know that drastic action is needed to protect future generations,” said Emilio B. Imbriglio, president and Chief Executive Officer at Raymond Chabot Grant Thornton.
Among its other recommendations to stimulate business recovery is a request to create an innovation tax credit to help small and medium enterprises increase their technology investments.
Raymond Chabot Grant Thornton also recommends the federal government establish specific targets that lead to a balanced budget in the medium term.