Canada to Lose CAD 9 Billion in Tax Shuffle

January 22, 2016 Taxation in Canada

OTTAWA – Canada’s move to shift tax burdens from the middle class to the rich will result in tax losses, despite previous promises that the change would be tax neutral.

In a new report released on January 21st the Parliamentary Budget Office of Canada has revealed that the recent changes to the rates of personal income taxes in the country will actually lead to a decrease in tax revenues.

Last year the personal income tax rates faced by high-income earners in Canada were raised, with the collected revenues intended to be used to offset the revenues losses arising from cuts to the tax rate faced by middle income earners.

Initially the government believed that the tax changes would be revenue neutral, and would not result in any decrease in the collections of personal income tax revenues.

However, in December 2015 the government conceded that the changes would actually lead to a loss of CAD 8.2 billion over the course of the next six years, but now research by the Parliamentary Budget Office indicates that even these estimates were not accurate, and the loss in revenues would actually hit CAD 8.9 billion over the next six years.

The fiscal impact of the tax changes is set to grow over the coming years, as in 2016 the tax shuffle is expected to result in a yearly loss of CAD 1.6 billion, rising to a level of CAD 1.9 billion in 2020.

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