C-2

Details

Full Title

An Act to amend the Income Tax Act

First Reading

December 9, 2015, Parliament 42, Session 1

Type

House Government Bill

Full Content

https://www.parl.ca/legisinfo/en/bill/42-1/c-2

Summary

Bill C-2 amends the Income Tax Act. It changes the tax rates that people pay on their income. It lowers the second tax rate from 22% to 20.5%. It also adds a new tax rate of 33% for people who earn more than $200,000 per year. The bill also changes how much money people can put into their tax-free savings accounts (TFSAs) each year. It reduces the annual contribution limit from $10,000 to $5,500, and adjusts this amount for inflation each year, starting in 2016.

In addition to the personal income tax changes, the bill includes changes to how gifts are calculated for tax purposes, especially for higher-income individuals. It also adjusts the tax rules related to split income, income from trusts, and investment income for Canadian-controlled private corporations. These changes ensure the tax system reflects the new 33% tax bracket.

Specifically, the bill changes the rates used to calculate refundable taxes for Canadian-controlled private corporations (CCPCs). It modifies how investment income and taxable dividends paid by these corporations are taxed. Furthermore, it adjusts the rules for calculating taxes on dividends received by corporations from other corporations.

The changes related to the 33% tax bracket apply to the 2016 and later taxation years. The TFSA changes came into effect on January 1, 2016. There are also transitional rules for taxation years that started before 2016 and ended after 2015, ensuring a smooth transition to the new tax rates and calculations.

Issues

Economy

• Taxation

  Bill C-2 makes several changes to the Income Tax Act related to taxation.

  Firstly, it reduces the second personal income tax rate from 22% to 20.5%. Secondly, it introduces a new personal marginal tax rate of 33% for taxable income exceeding $200,000. It changes how gifts are calculated for tax purposes, especially for higher-income individuals, as well as adjusting the tax rules related to split income and income from trusts. Finally, it modifies how investment income and taxable dividends paid by Canadian-controlled private corporations are taxed.

Social Justice

• Income Inequality and Poverty

  Bill C-2 introduces a new 33% tax bracket for individuals with taxable income exceeding $200,000. This is a progressive tax measure, meaning higher earners pay a higher percentage of their income in taxes, which may help address income inequality.