ITAC RESPONSE TO PRIVATE CORPORATION TAX CHANGES
On October 2nd, ITAC submitted an ICT industry response to Finance Canada’s consultations on tax planning using private corporations. Recognizing the legitimate goal of reducing illegitimate tax avoidance, ITAC’s submission focused on potential impacts of the new tax measures on Canada’s innovation ecosystem – including the challenges of access to capital and industry’s sensitivity to changes in capital gains tax.
ITAC Submission – Tax Planning Using Private Corporations
Specific recommendations include:
- ITAC recommends the individual lifetime capital gains exemption (LCGE) be increased from $800,000 to $1,000,000 to maintain competitiveness avoid discouraging entrepreneurship.
- In recognition of the risks entire families take when starting businesses, ITAC recommends an exemption be allowed for spouses to combine their LCGE.
- To account for the potential loss of early stage capital available to startups, the government should provide incentives for individuals and corporations to invest in early stage companies. For instance, any passive investment rules should not apply to portfolios where a certain percentage is invested in early stage or scaling companies in high growth sectors.
- ITAC recommends Finance Canada review how the proposals will impact defensive corporate structures and ensure tax changes do not force technology companies to choose between facing an overwhelming tax burden and potentially fatal litigation risks.
- ITAC recommends the government work with a range of industries, including the ICT sector to develop measures which reduce illegitimate tax avoidance while not discouraging entrepreneurs from building longstanding companies.
For more information, please contact David Messer, VP Policy, at email@example.com