EXCLUSIVE-Canada's budget to include digital and luxury levies, but no wealth tax -sources

OTTAWA, April 18 (Reuters) – Canada’s first budget in two years, to be presented to parliament on Monday, proposes a sales tax for online platforms and e-commerce warehouses, a digital services tax for Web giants and a luxury tax on items like yachts, government sources familiar with the document said.

It will not include a wealth tax, a levy sought by the opposition New Democrats. Liberal Prime Minister Justin Trudeau’s budget will need the support of at least one opposition group to pass.

“The government is not moving forward with a wealth tax right now,” a government source told Reuters. “We will be taking meaningful steps to close loopholes and tackle tax evasion, and ask those who are doing well right now to pay just a little bit more.”

The budget will include a sales tax for online platforms and e-commerce warehouses starting from July, and a digital services tax on big Web companies starting from Jan. 1, 2022, both measures originally promised last year.

Online platforms include foreign-based vendors with no physical presence in Canada that sell products such as mobile apps and online video gaming. E-commerce warehousing is the storage of physical goods before they are sold online.

A luxury tax on new cars and private aircraft valued at more than C$100,000 ($79,970) and boats worth over C$250,000 will come into force next year if the budget is passed. RVs and snowmobiles would be exempt.

With the country’s housing market booming, the government is proposing to tax vacant residential property owned by non-resident, non-Canadian owners from Jan. 1, 2022, sources said.

There will also be an effort to crack down on jurisdiction shopping by large, profitable companies that attempt to artificially lower their tax obligations in Canada, sources said.

From 2023, Canada will aim to limit the amount of excessive interest expenses that can be deducted from profit, although small businesses will be exempt.

In 2022 or 2023, the budget will propose limiting the ability of multinational companies to artificially construct arrangements among countries that end up lowering their tax rates in Canada.

The sources provided no details. Finance Minister Chrystia Freeland is due to present the budget on Monday at about 4 p.m. (2000 GMT).

Offering up her first budget since taking over as finance minister last year, Freeland has promised up to C$100 billion in stimulus over three years to “jump-start” an economic recovery in what is likely to be an election year.

Separately, the Toronto Star reported on Sunday that Canada would set aside C$12 billion in the budget to extend its main pandemic support measures as much of the country battles a virulent third wave of COVID-19 infections.

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