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Private Equity Risks a Hit From Trudeau’s Interest-Deduction Cap

April 19, 2021, 8:07 PM

The budget unveiled by Canadian Prime Minister Justin Trudeau’s government on Monday includes a tax provision that could affect enterprises that rely heavily on debt financing, including private-equity firms and natural-resource companies.

The change affects tax deductions that certain businesses can take for the interest they pay on loans. Trudeau’s government wants to limit those deductions to an amount equal to 40% of a company’s earnings starting in 2023, and 30% after that. It estimates the measure would raise C$5.3 billion ($4.2 billion) in additional revenue over five years.

The measure is meant to prevent companies from minimizing their ...

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