Ottawa sees increase in personal tax revenue thanks to stronger economy, high-income earners
Personal income tax revenue shot up by nearly $10-billion last year according to a federal government report that attributes the gain to a strengthening economy and the ripple effect of tax changes aimed at raising more money from high-income earners.
Finance Canada will release its annual financial report on Friday, which will provide the final statistics for the fiscal year that ended on March 31.
It will show that personal income tax revenue increased by $9.9-billion, or 6.9 per cent, in 2017-18, according to a federal official, who provided The Globe and Mail with a section of the report but was not authorized to comment publicly.
The report will state that this increase in revenue is due to “economic growth and the unwinding of the impact of tax planning” that saw high-income individuals declare income in the 2015 tax year rather than 2016 in order to avoid the new top tax rate of 33 per cent on income above $200,000. The department says that tax planning led to a short-term drop in tax revenue from high-income earners in 2016, and the figures suggest there was a rebound in 2017.
The Globe did not receive a copy of the full report, which will include other information such as the final deficit figure for 2017-18.
During the 2015 federal election, the Liberal Party campaigned on a pledge to run short-term deficits and return to balance before the next election, which is scheduled for October, 2019. However the government’s most recent budget said deficits will continue beyond that date and no timeline has been announced for when the books will be balanced.
The Finance Canada data provide the most up-to-date information as to how several significant tax changes may be affecting federal government revenue.
The Liberals also campaigned on a central pledge of raising taxes on the top 1 per cent of incomes in order to pay for a tax break for middle-income earners.
Those tax-bracket changes took effect on Jan. 1, 2016. In 2017, Finance Minister Bill Morneau announced a series of widely criticized changes to small business tax rules that are primarily aimed at high-income earners.
One of those changes included new restrictions on the splitting of business income with family members through dividends. Those measures took effect on Jan. 1, 2018.
Categorised in: Canadian News