Post-election: The Tax Policy Road Ahead

To: Finance Officials and Tax Observers
From: John Oakey
Date: May 27, 2025
Re: Post-election: The Tax Policy Road Ahead

The election is over, and we have a minority Liberal government.

We will see if the 45th Parliament functions better than the 44th. Given the need for national unity, I anticipate a more cooperative Parliament.

From a tax policy perspective, there are three priorities:

1. Implementation of existing draft legislation,
2. Implementation of election promises, and
3. Responding to the Trump Administration.

1. Implementation of existing draft legislation

The last Parliament left taxpayers in limbo, with a long list of draft tax measures left hanging due to legislative gridlock. These include trust reporting rule amendments, Canada Revenue Agency (CRA) audit power expansion, enhancements to the Scientific Research and Experimental Development (SR&ED) program and clean economy Investment Tax Credits (ITCs), the Canadian Entrepreneurs Incentive, Alternative Minimum Tax (AMT) changes, and capital gains revisions. The fate of the capital gains measures seems sealed with Prime Minister Mark Carney’s announcement, but the rest remain with Finance.

The new government must resolve this backlog by giving taxpayers and advisors much-needed certainty. We’re all weary of interpreting CRA’s “long-standing position” on draft legislation.

2. Implementation of election promises

Alongside outstanding measures, the Liberals proposed several new ones:

• Eliminate the GST on new homes,
• Reduce the lowest personal tax bracket by 1 point,
• Raise the SR&ED expenditure limit to $6 million,
• Introduce a flow-through share program for certain start-ups, and
• Create a “patent box” to supplement SR&ED

Other promises of interest to accountants:

• Expert review of the corporate tax system (fairness, simplicity, competitiveness),
• Reform of the Disability Tax Credit application process, and
• More CRA technology to tackle evasion and close loopholes

The platform was vague on the scope and timing of corporate tax and disability tax credit reviews.

The platform estimated $3.8 billion from additional penalties and interest. “Prosecute tax evasion, fix loopholes, and strengthen enforcement” sounds fine in principle – but last year’s proposal to expand CRA audit powers raised serious concerns in the tax community. As the saying goes: “With great power comes great responsibility.” These powers must be used wisely.

3. Responding to Donald Trump

Mr. Carney must navigate volatile tariffs and looming US tax cuts – both harmful to our competitiveness.

He’ll also need to address the US pullout from Pillar II and its opposition to Canada’s Digital Services Tax (DST). The Liberal platform emphasized international cooperation, stating:

A Mark Carney-led Government will lead an international effort with partners in Europe and across the G7 to get a fair and consistent set of international tax rules completed, as proposed by the Organisation for Economic Co-operation and Development (OECD). We will not surrender on rules that ensure large multinational companies pay a fair and consistent share of the profits they earn in a country.

The phrasing – “partners in Europe,” “proposed by the OECD,” and “we will not surrender” – seems intentional. But the Trump Administration’s hostility toward our Global Minimum Tax and DST will be a major challenge.

Improving the tax system and lessons learned

  Although the federal budget has been deferred until the fall, the importance of providing clarity to taxpayers on outstanding tax measures and election promises remains the same.  Without a spring federal budget from this newly election government, we will need to rely on the election platform and throne speech to understand its direction.  We are hopeful for an early fall federal budget providing the details needed for taxpayers to have some long-awaited clarity.

The last government introduced a torrent of tax changes: Specified Corporate Income, Tax on Split Income, Adjusted Aggregate Investment Income, Underused Housing Tax, bare trust reporting, Excessive Interest and Financing Expenses Limitation, the DST, the Global Minimum Tax, AMT, Mandatory Disclosure Rules, General Anti-Avoidance Rule, clean economy ITCs, capital gains, and more. The system cracked under the pressure – Finance was overextended, CRA struggled, and taxpayers faced complexity and uncertainty.

As we move forward with a quasi-new government, I have two requests:

• Slow the pace of change so it’s manageable for Finance, CRA, taxpayers, and advisors, and
• No more tax policy via social media.

John Oakey is Vice President, Taxation, at CPA Canada, and a member of C.D. Howe Institute’s Fiscal and Tax Competitiveness Council. This Memo is based on a presentation at the May 7th council meeting.

To send a comment or leave feedback, email us at blog@cdhowe.org.

The views expressed here are those of the author. The C.D. Howe Institute does not take corporate positions on policy matters.

Want more insights like this? Subscribe to our newsletter for the latest research and expert commentary.