2022 Federal budget: Part two – Environmental initiatives and wealth tax

Pre-budget insights and analysis

Video overview

The 2022 federal budget is expected to be introduced in early-April. To address what measures may be included, we’ve developed a two-part video series with our National Tax Leader, Tara Benham.

In our second video, Tara discusses two additional measures that we’re likely to see in the budget: environment and wealth tax. These measures are intended to support the government in meeting emissions targets and recovering from pandemic spending.

Key moments in this video

  • 0:35: Environmental initiatives (Measure one)
  • 2:54: Wealth tax (Measure two)

Video transcript

Click to read the transcript

Hi, I'm Tara Benham, National Tax Leader for Grant Thornton.

This is the second of our two-part series on what to expect in the 2022 federal budget.

In this video, I'm going to focus on two additional measures that we're likely to see in the budget. They circle around environmental issues and a possible wealth tax.

These would be intended to support the government in meeting emissions targets and recovering from pandemic spending.

Environmental initiatives

Environmental initiatives have been an ongoing focus for the Liberal government, and in the 2022 budget, we expect additional measures to help meet its aggressive emissions targets from a stimulus perspective.

Why does it matter?

This is an area that they can align with other parties who are calling for strong action. This is important for a minority government to consider.

In addition, the world as a whole moving in this direction. We need only look at our own country to see catastrophes that we faced including flooding, fires, and extreme heat in the past year.

In order to make Canada's aggressive targets to have zero emissions by 2050, additional measures might be needed from the government to encourage businesses to help meet these targets.

What's expected in Budget 2022?

Several environmentally focused measures were introduced as part of the Liberal Party's election platform last year.

These include:

  • Investment tax credits for renewable energy, battery storage and clean technologies.
  • Expansion of the types of vehicles qualifying for federal zero-emission vehicle accelerated tax write-off rates, and
  • grants and loans to assist individuals in retrofitting and upgrading their homes to help save on energy costs.

The theme? Support for reducing emissions and improving air quality.

The government also proposed last year to reduce the corporate tax rates for businesses that manufacture zero-emissions technologies that meet specific criteria.

Could this be broader? Some interest groups are calling for the expansion of these rules to:

  • Producers and distributors of clean electricity,
  • Green consulting businesses, and
  • businesses that are not specifically a green business but do provide some services that might be considered green.

Pre-budget submissions are also calling for the elimination of all fossil fuel subsidies.

We'll be watching to see if draft legislation is enacted on the proposals from the 2021 budget, as well as possible additional tax cuts to encourage continued investment in green initiatives.

Wealth tax

Wealth tax is another idea that has been raised by various entities, so we may see it in the upcoming budget.

Why does it matter?

This potential tax measure is intended to deal with wealth inequality in Canada.

Recent polls indicate general support for such a tax amongst Canadians. Therefore, it wouldn't be surprising if it's mentioned.

What's expected in Budget 2022?

Canadians for Tax Fairness, a non-partisan, not-for-profit entity that advocates for fair and progressive tax policies is advocating for wealth tax as a way to reduce wealth and income inequality.

They have proposed an annual wealth tax with progressive tax rates from 1% to 3% for net wealth over $10 million, as well as a tax on high wealth estates.

In addition, a Liberal MP made a proposal to implement a one-time tax on net wealth accumulated up to a specific date.

In his proposal, this tax liability could be paid over five years.

With the significant levels of government spending over the last two years, the government may decide to bring in such a tax, whether it be on an annual or a one-time basis.

Given the diversity of opinions and the fact that we have a minority government. This is something that will likely be discussed in the budget.

For more details on what to expect in the 2022 Federal Budget, be sure to click on the link below to read our pre-budget insights and analysis.

For more on the 2022 federal budget, watch part one – child care and pandemic stimulus.

2022 Federal Budget: Pre-budget insights & analysis

Read our pre-budget alert 2022 for more information about what you may see in the 2022 Federal Budget.