March 10, 1953 (21st Parliament, 7th Session)

LIB

Douglas Charles Abbott (Minister of Finance and Receiver General)

Liberal

Hon. Douglas Abbott (Minister of Finance):

Mr. Speaker, it is not customary to refer to details of a proposed bill until that bill is introduced into the house, but in view of the question asked on March 5 by the hon. member for Three Rivers (Mr. Balcer) concerning the deductibility of certain provincial taxes for income tax purposes, I wish to make the following statement.
Under section 12 of the Income Tax Act, provision is made that specific corporation taxes paid to the government of a province or to a municipality are not deductible as an expense in computing income. These taxes which are not deductible are defined by regulation. The present regulation defines such corporation taxes to be those which have been imposed since September 1, 1941, or, alternatively, the amount of any increase in such taxes which applies following September 1, 1941. The regulations do not single out any particular tax for disallowance.
For some time, the government has been considering this present limitation and believes that it would now be appropriate to remove it. Accordingly, it will be recommended in the bill to amend the Income Tax Act that, with effect for the 1953 taxation year, the prohibition on the deduction of provincial or municipal corporation taxes will be withdrawn and any tax imposed on corporations by a provincial government or municipality which has not rented its rights to impose such tax and which, under ordinary rules, would be regarded as an expense of doing business, will in future be deductible.
This amendment is being recommended in conjunction with the proposal which I announced in my budget speech of increasing the credit for corporation income tax from 5 per cent to 7 per cent in accordance with the principle that nothing in federal legislation shall in any way discriminate
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Inquiries of the Ministry against a province which does not enter into a tax rental agreement. This is in line with the declared intention of the federal government that nothing should be done which could be interpreted as pressure, direct or indirect, on any province to accept or renew a tax rental agreement.

Topic:   INCOME TAX ACT
Subtopic:   WITHDRAWAL OF PROHIBITION ON DEDUCTION OF PROVINCIAL OR MUNICIPAL CORPORATION TAX
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