Budget 2018: Sensible Measures

From a tax perspective, the headline news is that Budget 2018 completes the Government of Canada's general retreat from the astounding – and, to many in the tax community, largely incoherent – July Proposals to address passive investment income in private corporations.

The revised measures introduced on December 13, 2017, dealing with the expansion of the tax on split income rules, while clearer and more measured, were not without flaws. Some feared that Budget 2018 may reintroduce the rules addressing surplus stripping, which were taken off the table in mid-October. Those fears were unfounded. 

Budget 2018 completes the retreat: the proposed rules governing passive investment income earned in private corporations do not bear any resemblance to the measures contained in the July Proposals. The Minister of Finance and his team should be commended for recognizing the serious problems with the July Proposals, and for addressing them effectively.