441-02640 (Taxation)

Since taking office in 2015, the government has promoted greater fairness in the tax system, particularly for the middle class. That is why the government has put more money back into the pockets of Canadians by increasing the amount of money they can earn before paying federal income tax. This amount, known as the Basic Personal Amount, was increased starting in 2020 and reached $15,000 in 2023. In 2024, the Basic Personal Amount is $15,705, meaning that Canadians can earn up to this amount before paying federal personal income tax.

This measure builds on the government’s progress since 2015, including the middle-class tax cut that reduced the second personal income tax bracket from 22 percent to 20.5 percent. As part of this initiative to strengthen the middle class, the government introduced a new top personal income tax rate of 33 percent on income over $200,000 (now $246,752 for 2024, as tax brackets are also indexed to inflation) to shift the tax burden to high-income Canadians. The government also increased the capital gains inclusion rate (i.e., the proportion of a capital gain that is subject to tax) to make the tax system fairer. This change would increase the inclusion rate from one-half to two-thirds for capital gains realized annually above $250,000 by individuals, and for all capital gains realized by corporations and most types of trusts. Capital gains from principal residences will remain tax-free to ensure Canadians do not pay capital gains taxes when selling their home. Only 0.13 per cent of Canadians with an average income of $1.42 million are expected to pay more tax on their capital gains in any given year. Prior to making these changes, wealthy individuals faced a lower marginal tax rate on their capital gains than what a middle-class worker would face on their paycheque. For instance, a nurse in Ontario earning $70,000 would face a combined federal-provincial marginal tax rate of 29.7 percent. In comparison, a wealthy individual in Ontario with $1 million of capital gains income would face a marginal tax rate of 26.8 percent.

The government has also provided new, targeted support to the Canadians who need it most, to help make the basic necessities of life more affordable. This includes enhancing the Canada Workers Benefit; creating a new, affordable universal early learning and childcare system; and implementing the new Canadian Dental Care Plan, which will ensure up to 9 million Canadians, including seniors, will not have to choose between taking care of their health and paying the bills at the end of the month.

Canada’s progressive tax system takes into account a person’s ability to pay tax. It includes many tax-relieving provisions to recognize a person’s reduced ability to pay, as well as measures to ensure that those who can afford to contribute more do so. Although this involves some degree of complexity, work is always underway to make it easier for Canadians to comply with their tax obligations and access the benefits designed to support them. For example, the government’s ongoing efforts to expand automatic tax-filing initiatives will help ensure that more low-income Canadians are able to receive the benefits to which they are entitled.

Since taking office in 2015, the government has also taken several actions to combat tax evasion and avoidance.

The government has made significant investments to strengthen the Canada Revenue Agency’s (CRA) ability to combat tax evasion and aggressive tax avoidance. These investments have already yielded positive results. Recent investments include:

• Strengthening the CRA’s ability to fight tax crimes such as money laundering and terrorist financing by upgrading tools and increasing international cooperation;
• Increasing the CRA’s offshore audit capacity to focus on people who avoid taxes by hiding income and assets abroad;
• Bolstering the CRA’s capacity to address tax non-compliance in real estate transactions;
• Expanding audits of larger entities and non-residents engaged in aggressive tax planning; and
• Providing legal resources to support audits and to defend against appeals to the courts by wealthy taxpayers motivated to spend large amounts on litigation.

The government is committed to curtail base erosion and profit shifting (BEPS) by multinational groups and has been working actively with other countries to develop and implement the BEPS action plan and two-pillar solution that were developed at the Organisation for Economic Co-operation and Development and Inclusive Framework.

Canada continues to work with its international partners to address corporations and wealthy individuals inappropriately shifting profits offshore and using other tax avoidance schemes.

Canada is one of more than 140 members of the Inclusive Framework that entered into a historic agreement on a global minimum tax regime under Pillar Two of the two-pillar solution that would ensure that large multinational corporations are subject to tax at a rate of at least 15% on their profits wherever they do business.