Income splitting: two times more money than expected to the federal government, according to a report

Photo archive / QMI Agency

QMI agency

Thursday, 8 march 2018 15:17

UPDATE
Thursday, 8 march 2018 15:17

Look at this article

OTTAWA – The new rules on income splitting will bring to the federal twice more money than is envisaged by the ministry of Finance, according to a new report from the parliamentary budget officer (DPB).

The watch-dog of public finance has found that the rules in force since 1 January could be expected to generate 356 million $ to Ottawa as early as next year. For its part, the federal budget was tabled last week plans to rather an amount of $190 million.

The restrictions on income splitting are intended to prevent certain professionals constituted private corporation to defer their income on their family members just to save tax.

The minister of Finance, Bill Morneau was announced this fall that the split would now be possible with loved ones who are actively contributing to the family business.

The figures put forward by the DPB from one of the three simulations that he has conducted. The scenario the most conservative projected revenue to $ 262 million in 2018-2019, which is still above the federal estimates.

The scenario most generous, he provides a wealth of 659 million $ to Ottawa.

The DPB is estimated that 33 000 canadian families will be affected by the measures on income splitting. More than 95 % of the additional tax collected would come from households with an income above $150,000.

However, these are only estimates, warns the director of the budget, because it concedes not to have “been able to clearly establish what persons would be subject to the rules relating to the tax on split income”.

The findings of the report show that the reform Morneau is “expensive and inaccurate”, according to the canadian Federation of independent business (CFIB). In addition to the fact that the government “will draw about twice as much money in the pockets of canadian companies”, we do not know exactly who will be affected, denounced the organization.

“When the ministry of Finance and the DPB are struggling to identify who will be affected, one can easily imagine the confusion that will reign when it will be the turn of the Canada revenue Agency to put its nose in this folder”, argued the senior vice-president of the CFIB, Martine Hébert.

The new restrictions on income splitting, are part of the tax reform introduced last year by the minister Morneau. The reform also includes changes to the taxation of income of passive investment companies.

At the time of its presentation to the summer of 2017, the reform caused an outcry among doctors and farmers, for example, that accused the government of treating them as profiteers. In front of the grumbling, Bill Morneau had declined on several measures, in addition to announcing a tax cut for small and medium-sized enterprises.