It will no be longer possible for polluters and other law breakers in Canada to deduct the cost of their punishments from their income taxes, the federal budget says.

Ottawa is amending the Income Tax Act to prohibit fines and other monetary penalties from being deductible. The changes will apply to any fine or penalty imposed by law after March 22.

The government says it is joining other countries in specifically denying deductibility of monetary penalties in response to criticism that the ability to write off such costs diminishes deterrence.

“Such a deduction is contrary to public policy objectives,” the budget says.

In recent years, the courts have held that fines and other monetary penalties were eligible as deductible costs of earning an income, unless the offence was so egregious or repulsive that the penalty could not reasonably be considered to be tied to income.

However, the amending legislation will carry authority to exempt certain fines and penalties if deductibility is held to be in the public interest.

The views of the House of Commons finance committee will be sought on any proposal to grant this type of exemption, the government says.

The amendments will not apply to any penalty or damages paid under a private contract.