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Canada's Magazine for Financing & Leasing Executives

March 14 , 2013

Federal budget 2013 may accelerate capital cost allowances in oil, gas sectors, KPMG predicts

TORONTO--With a goal to balance the books by 2015, the Conservative government is expected to stay the course in its approach to the federal budget this year, KPMG predicts. However, the firm also expects the budget to explore expanding the accelerated capital cost allowance to encourage construction of domestic infrastructure in the oil and gas sector.

Budget day is now set for March 21 and will likely bring more measures to close "tax loopholes" like the ones the government introduced in the previous two years' budgets. For example, the 2012 budget included new rules affecting multinational corporations, while measures in the 2011 budget affected corporate partnerships and some people's RRSPs. Since these changes can touch such a broad range of corporations and individuals, it's difficult to predict who might be affected by new "tax integrity" provisions in this year's budget.

The budget could also include further streamlining and improving of the SR&ED tax incentive program. Based on recommendations from the October 2011 Jenkins report, "Innovation Canada: A Call to Action", these improvements could include the government implementing its commitment to direct savings generated by previous changes to support innovative private-sector businesses.

"I don't expect we are going to see any wide-ranging tax measures announced in the budget this year," says Elio Luongo, Canadian Managing Partner, Tax, KPMG in Canada. "Given the government's plans to balance the budget in the next few years, we don't anticipate any major increases in spending. But the federal government has publicly stated that they plan to introduce more measures to close 'tax loopholes'—so we should brace ourselves for a few announcements with that in mind."

What to expect

This year's report by the House of Commons Finance Committee, Jobs, Growth, Productivity and Demographic Change: Challenges and Opportunities for Canada, highlights additional 2013 budget considerations:

•Business tax changes: improve the SR&ED tax incentive program to offer more direct support to innovative private-sector businesses; explore expanding the accelerated capital cost allowance to encourage construction of domestic infrastructure in the oil and gas sector.

•Personal tax changes: continue to implement pooled retirement pension plans; examine tax provisions in relation to estate and succession planning and their impact on the transfer of family owned businesses; explore tax incentives to assist skilled workers and their mobility in an effort to support skilled trade in Canada.

•Charities and NPOs: changes to the tax credit for charitable donations to facilitate greater charitable giving; eliminate or lower capital gains tax on charitable donations of real estate and similar property and the shares of private corporations.

The Finance Committee also recommends that the government find ways to simplify the Income Tax Act, and establish a commission to undertake a comprehensive review of the tax system to ensure its fairness and neutrality by closing "loopholes" that allow Canadians to avoid paying tax.



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