Liberals aim to crack down on private corporate tax loopholes

Plans aim to prevent some business owners, particularly wealthy ones, from distributing income among family for tax-savings purposes

(Graeme Roy/CP)

(Graeme Roy/CP)

OTTAWA – The federal government is proposing several measures to close loopholes for private corporations it says enable many Canadians to “unfairly” reduce how much tax they pay.

The Liberals unveiled plans today aimed at preventing some business owners, particularly wealthy ones, from distributing their income among family for tax-savings purposes, even if those relatives are not involved in the business.

The Finance Department believes about 50,000 families in Canada are engaged in the practice known as income sprinkling.

The federal government also released proposals to target those who gain tax relief through passive investment income and by converting their income into capital gains, which are taxed at a lower rate.

The government is launching a 75-day public consultation period to allow stakeholders to examine and weigh in on the three proposals.

The feds believe the proposed measures could generate significant amounts of revenue, with the plan to address income sprinkling providing an estimated $250 million per year.

The Trudeau government said in its March budget that it would take a closer look at measures to address what it considers tax-fairness issues.

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