Declassified cabinet records reveal 1996 plan for tax bond on Canadians leaving country

CALGARY — Canadians moving abroad could have been required to pay tax on their accrued capital gains or post a bond before leaving under a 1996 proposal considered by cabinet.As reported by Blacklock’s Reporter, newly declassified minutes of an October 2, 1996, cabinet meeting show then-finance minister Paul Martin described the proposal as the “toughest regime worldwide” for taxing departing residents.Martin planned to introduce legislation requiring Canadians who moved to another jurisdiction to pay tax on capital gains accrued in Canada or provide security to cover the amount owing, the minutes say. Foreign investors would have been exempt for their first five years in Canada.Then-revenue minister Jane Stewart raised concerns that the measure could draw criticism because it would also affect taxpayers who were not wealthy..Think tank calls on Alberta to eliminate capital gains tax, says move would boost incomes by $1.1 billion .Cabinet agreed the Income Tax Act should be changed so departing residents, including trusts, would owe Canadian tax on gains accrued before leaving. They could defer payment until selling the assets by posting security acceptable to the minister of national revenue, according to the minutes.The proposal included exceptions for assets Canada could still tax after an owner left, such as Canadian real estate and business property. Emigrants with property worth more than $25,000 would have had to report their holdings to Revenue Canada, excluding personal-use items worth less than $10,000.The cabinet discussion followed a May 1996 auditor general’s report concerning Revenue Canada rulings that allowed family trusts to move at least $2 billion in assets to the United States. The auditor warned the transactions may have circumvented the intent of capital gains tax law and put future tax revenue at risk.The case prompted criticism in Parliament, where MPs questioned why such a large transfer could proceed without an immediate capital gains tax payment.The bond requirement described in the cabinet minutes was not introduced.

Declassified cabinet records reveal 1996 plan for tax bond on Canadians leaving country

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