Want to have your say in the country's finances? Perhaps you've got a couple of great tax ideas you'd love to see implemented? The time has come to make your views known to the government through the annual Pre-Budget Web Consultation process, kicked off this past week by Minister of Finance Jim Flaherty.
"As Minister of Finance, I welcome advice from Canadians on priorities for the annual federal budget. In order to provide strong leadership, it is important to listen," said Mr. Flaherty on Monday.
The annual consultation process allows interested Canadians to submit their ideas through the Department of Finance's Web site (www.fin.gc.ca/activty/consult/prebud08_e.html).
In 2007, almost 8,000 Canadians participated in the online consultation process, providing a wide range of ideas from debt reduction and restoring fiscal balance to suggestions for tax cuts.
The Investment Funds Institute of Canada (IFIC) in its Pre-Budget 2008 submission recommended a number of changes that would assist the large number of Canadians expected to retire within the next two decades.
One of IFIC's recommendations was to implement a promise made during the last election campaign to eliminate -- or at least, defer -- capital gains tax when proceeds are reinvested within six months.
This would address the so-called "capital gains lock-in" effect that has Canadians sitting on considerable assets with accrued capital gains locked-in for no other reason than to avoid paying tax on the capital gain if the assets were sold. This lock-in effect results in capital being allocated to less-efficient assets and that, in turn, impairs economic growth.
Allowing investors to free up some of their locked-in gains would also encourage Canadians to rebalance and better diversify their portfolios.
While the government has implemented nearly every other tax promise in its two-year-old mandate (including the much-maligned two percentage point GST cut), it has been noticeably silent when it comes to this promise.
That's likely due to the cost of granting a blanket capital gains exemption, as well as the complexity of how such a tax measure would be implemented.
Fortunately, over the course of the past two years, the government has been given a number of suggestions by various industry groups on how best to implement this idea. These range from the introduction of a new Capital Gains Deferral Account (recommended by the C.D. Howe Institute) to reinstituting the old $100,000 lifetime capital gains exemption (repealed in 1994), which would accomplish a similar objective.
So, if you like this idea or have a better one, be sure to provide your input. The deadline is midnight on Feb. 11.