Should this kind of tax dodge be legal?

[The Green Barbarian]

To GB - in response to your rather rude comments, no I don't "hate" people for taking advantage of a tax system that is flawed. But I do strongly disapprove of a tax system that gives more breaks to the wealthy, than it does to everyone else.

Given the content of your posts, my responses aren't "rather rude" at all, in fact they are quite polite, in that I am giving you the benefit of the doubt and just stating that you are ignorant, rather than deliberately lying, when you state that the current tax system gives "more" breaks to the wealthy, which is just plain wrong. Have you ever looked at how many tax breaks are available to the non-wealthy? They pay almost no tax. And I'm not saying that's a bad thing. It's just wrong, and silly, and just terrible, to say that the current system gives "more" breaks to the wealthy. This is just an awful thing to say, and so if you are getting rude responses, you should, as you are saying rude things.

This system has gone on for years, mainly because many of us ordinary folks who don't benefit from it, are largely unaware of the unfairness or, even when aware, often have difficulty arguing against it because of the complex nature of the subject.

Or, more accurately, there is no problem at all, and some are trying to create a problem out of political necessity or because they are just really awful people, who are jealous of those who make more money than they do, and so want to try and convince others that punitive taxation should be put in place that is horrible and unfair, all out of a sense of trying to fill that giant void of hate inside them.

Truthfully, one has to be an accountant to fully understand all the ins and outs of such a complicated system.

Truthfully, one just has to dedicate a small amount of time to this subject, and not look at it with an eye that is jaundiced with hate and jealousy. Then understanding would dawn pretty quickly.

And, while I don't mind paying a little bit more to help the needy, I sure as hell object to paying a little bit more to help the wealthy.

Good because then you are objecting to nothing right now, as the scenario you state doesn't exist.

But you shouldn't be surprised that there are those of us who DO want to see such an unfair system changed.

I shouldn't be surprised that there are people so ignorant of how our tax system works, and yet demand changes anyway, that are punitive and unfair, purely because of their own jealousy and hatred. But yet I am still surprised, and saddened too, that such people can't work out their personal issues, and instead want to wield government and the Canadian taxation system as some kind of revenge tool, all due to unresolved personal issues of inadequacy and hate. It truly is sad to read how you feel, Merry, and how stubborn you are, in not listening to one person in this thread who has pointed out, over and over again, that you are dead wrong. Just plain wrong.

[The Green Barbarian]

If we did away with a lot of these kind of tax loopholes, everybody (including the rich) would have a much lower tax rate on regular income than is currently the case.
.

These kind of loopholes? You haven't actually exposed any loopholes. Not one loophole. Anywhere. And yet you are still droning on about loopholes. Why don't you actually show us a loophole, and then we can talk about it. Otherwise, you are just babbling. It's like you are pointing at an elephant, and calling it a zebra. People here have shook their heads, and said, no Merry, actually that's an elephant. And yet you keep insisting on calling it a zebra. So at some point, most people just finally leave the discussion, and let the crazy person continue to point at the elephant, and scream "Zebra!!! Zebra!!"

[Merry]

There are many people who believe we should strive to make our tax system both fairer, and less complicated than is currently the case. And to accuse them all of thinking like that just because they are "jealous" of those who are wealthy is a grave injustice to those folks.

Justin Trudeau also said he believes that there are those who abuse the "small business" tax regime, by using it as a means to reduce their personal tax bills as opposed to actually running a real operating business. Does that mean he is "jealous" of such folks? Hardly, considering he's a rich guy himself.

He even went so far as to admit he had used a non operating small business himself to reduce taxes . And good for him, for being brave enough to publicly admit that he'd done so. It's perfectly legal, but he and many others think it shouldn't be.

If we want to create some kind of tax shelter for people who sell their business and retire, then lets be honest and call it what it is. Instead of allowing such folks to use regulations designed to help genuine small business, provide them with something similar to an RSP but without any kind of maximum contribution limit.

One size does not, and should not, fit all when it comes to designing regulations suitable for helping genuine small businesses, and regulations designed to help those who sell their business and retire, to shelter their capital from tax. Both may be worthy goals, but each has its own uniqueness that needs to be dealt with separately, not lumped in together the way they currently are.

[hobbyguy]

The fundamental argument goes to the "you didn't build that" issue that Obama raised.

The corporations are all "dead ducks" without the use of public roads, bridges, wharves, sewers, etc. etc.

So are we as citizens.

The "we", citizens and corporations need to pay for the things that make the economy work. It is a self feeding arrangement. Corporations need educated workers, citizens want their kids educated, so we build schools, so BOTH should pay. Corporations need healthy workers, and workers want to be healthy, so we build hospitals, so BOTH should pay.

Where this has broken down is in two places. The first being that many corporations are foreign owned and are fully vested in the bilge water "corporations only duty is to their shareholders". So corporation LOBBY and use money to invest in getting lower tax rates and loopholes so that they can up profits. Corporations also spend a LOT of money on "Think Tanks" that spew out biased reports and misinformation to support their lobbying.

The facts are that Canada has lost a huge amount of manufacturing capacity (jobs is another issue because of technological change) because corporations use this windfall profit from extraneous tax cuts to purchase other companies, then shut them down, move the jobs from profitable Canadian companies to low wage countries.

The second place this has broken down is that corporations have been allowed to become too large. The anti-trust battles started by Teddy Roosevelt and his generation took a long time to get to a good place, but the anti-trust laws have been stripped away, especially in trade agreements like the one Harper made with China, and corporations have run amok. It is now to the point where if you want corporations to invest in your area, you darn near have to pay them to do it. See the adds from New York State, and others, promising 10 year ad more "no tax" status.

We do need to address this imbalance. No problem with corporations being successful. But there were valid reasons for breaking "ma Bell" and there has not been such an action since.

That includes the taxation imbalance, where corporations are exporting profits (some of that from lobbied tax loopholes and cuts) from our country for the purpose of undercutting jobs in our country. We see this in poor R&D investments in Canada, poor productivity investments in Canada (new equipment and plants etc).

So if Canada gets less than nothing out of special tax status for corporations - why not fix it?

[Rwede]

I shouldn't be surprised that there are people so ignorant of how our tax system works, and yet demand changes anyway, that are punitive and unfair, purely because of their own jealousy and hatred. But yet I am still surprised, and saddened too, that such people can't work out their personal issues, and instead want to wield government and the Canadian taxation system as some kind of revenge tool, all due to unresolved personal issues of inadequacy and hate. It truly is sad to read how you feel, Merry, and how stubborn you are, in not listening to one person in this thread who has pointed out, over and over again, that you are dead wrong. Just plain wrong.

Hey, Angry Tom wanted to jack the tax rate too, even though he had no idea what the tax rate was. All he knew was it had to be raised, whatever rate it is was irrelevant, apparently.

Thus, it's not surprising that Tommie the Commie's most devout followers are totally ignorant about our taxation system too. All they know is someone must be doing better than they, so we better hammer those who are doing better. That's much easier than doing better oneself, per the NDP mantra.

[The Green Barbarian]

There are many people who believe we should strive to make our tax system both fairer, and less complicated than is currently the case. .

And if they believe that it isn't fair right now, they are speaking from a position of sublime ignorance.

[Merry]

Imagine gathering your receipts to add up your income at tax filing time in April, writing it down on a single line, subtracting contributions to RRSPs and pension plans and a few other deductions, and then calculating the income tax that you owe to federal and provincial governments. The form is just a page and is so simple that most Canadians don’t need to go to an accountant or spend money on an electronic program to calculate their returns.

Sound like science fiction? Not really. This proposal for a simple income tax has been made numerous times in the past both in Canada and other countries.

The federal government even took it seriously enough that the Goods and Services Tax form is a page submitted to Canada Revenue Agency.

The only thing that gets in the way of putting a stake into the heart of complex and distorting income taxation are voters tolerating special interest groups pleading for targeted preferences and politicians enacting special provisions to attract votes. We could devise an income tax that is fair, simple and pro-growth if voters rose to the occasion and voiced their displeasure over a tax system that has gone off the rails.

Simplification would be a major disruption, but well worth the effort. Some people would pay more tax and others less in a tax reform that yields the same revenue, but the long-run economic benefits will appeal to voters. Only accountants, lawyers and tax economists like myself will regret a shift to a simple income tax since the demand for advisory services will drop like a stone.

http://business.financialpost.com/finan ... reform-now

[Merry]

While tax rates may have come down in recent years, Canada’s income tax system has become increasingly complex and compliance costs have continued to grow at an unsustainable rate.

Businesses and individuals are subjected to hundreds of various taxes from all levels of government – taxes that are unnecessarily complex and difficult to understand, often cumbersome and labour-intensive, and even duplicative or contradictory from one jurisdiction to another.

On an international scale, Canada’s tax system is among the most complex in the world – this hurts our economy and adversely affects small and medium size enterprises (SMEs) as well as individual taxpayers.

There have been very few attempts to simplify the tax system since its creation in 1917. The reason is very clear. Tax simplification comes at a very high political cost, since any reform will involve choices and trade-offs, and have both winners and losers.

http://www.cga-canada.org/en-ca/researc ... cation.pdf

[Merry]

A new report shows the system isn’t just more complex, but says it’s also costing filers more money.

“Canadian families and businesses incur significant costs complying with the tax system,” states the Fraser Institute report called Measuring Tax Complexity in Canada.

“Those costs include direct spending on items such as accountants, lawyers, and computer software, as well as the financial cost of the time it takes to compile the materials and complete the forms. Governments also incur costs to administer and collect taxes.”

The think tank is calling on the federal government to start simplifying the tax system to save filers both time and money. It may even have the added benefit of helping to reduce some tax-time procrastination.

The report looks at tax expenditures (such as credits, deductions, exemptions and exclusions), tax legislation and tax guides as its measures of tax complexity.

It shows the number of federal personal income tax expenditures has increased 22 per cent since 2000, the text area of tax legislation has increased 19 per cent, and the size of the federal personal income tax guide has grown 25 per cent.

“What’s clear is that all indicators point to an increase in federal tax complexity for Canadian families, businesses and even governments,” said Charles Lammam, director of fiscal studies at the Fraser Institute and co-author of the report.

“A worthwhile goal is to simplify the tax system, making it easier to understand and less expensive in time and money.”

The Fraser Institute is among a growing number of organizations calling on the government to simplify Canada’s tax system. It’s not just about saving money and paperwork, but making Canada a more attractive place to do business, especially for outsiders looking to set up shop here.

In a recent Canadian Chamber of Commerce report highlighting the Top 10 Barriers to Competitiveness in Canada, the country’s costly and complex tax system was in fifth spot.

“Canada’s tax system is in urgent need of reform,” the report states. “It has become increasingly complex, multi-layered, and a costly challenge for Canadian businesses of all sizes.”

It also cited the World Economic Forum’s Global Competitiveness report, which stated tax rates and regulations among the top challenges to doing business in Canada.

“The challenge of tax compliance is significant for businesses of all sizes,” states the Chamber of Commerce report. “A streamlined and more efficient tax regime would free up time and capital for Canadian companies so that they can focus on growing their business, investing and creating jobs.”

https://ca.finance.yahoo.com/blogs/insi ... 48883.html

[GordonH]

2 certainties in life, death and taxes.
Since there is little to debate over the first one the second one makes up for it. lol

[Merry]

Former Statscan assistant chief statistician Michael Wolfson, who is a professor at the University of Ottawa, has produced research showing the top 1 per cent actually earn more than it appears when income from their small businesses is taken into account. Prof. Wolfson said doctors and dentists are among the most common types of small business and he suggests the new government should take a closer look at how these and other professionals are using the small-business tax break to split income among family members. He estimates tighter rules could raise about $500-million in tax revenue.

“There remains no question in my mind that there’s a substantial amount of tax avoidance associated with the small-business deduction,” he said, describing it as “a dark corner of the tax act” that hasn’t received a great deal of parliamentary scrutiny over the years.

The Liberal platform promised to lower the small-business tax rate while ensuring it “is not used to reduce personal income tax obligations for high-income earners.” The platform did not explain how this would be accomplished.

McMaster University economics professor Michael Veall, who has studied the income-inequality issue extensively, said potential options could involve tightening the rules related to investment income for small business.

“That is where I expect they will go, but it’s not easy,” he said. “It’s going to be intricate and detailed.”

http://www.theglobeandmail.com/news/nat ... e27077119/

[Rwede]

Shut the front door! A FORMER bureaucrat with an axe to grind calls for someone else to pay his tax bill!

I never would have seen that coming! /sarc

[Rosemary1]

Fair taxation for all would need a total revamping of the taxation system.

An average employee and income earner has a paystub with all income and standard deductions. Preparing taxes is relatively easy. Any additional exemptions are usually covered by the simple standard tax forms. That is why the middle class is eroding. It is propping up low income Canadians who don't pay taxes and Canadians at the top who have the ability to pay more but also have the means to avoid paying their fair share.

High earning individuals in the 1% and business owners are those who are more likely and able to use accountants, investment advisors and lawyers when it comes to protecting their incomes. Their sources of income, potential exemptions and taxes are more complex. That also makes it easer to find loopholes, avoid and defer taxes. You can increase the tax rate but without looking at the entire structure of loopholes to offset an increase it will make little difference.

Until a complete revamping of the taxation system if done, don't expect this to change much.

[logicalview]

High earning individuals in the 1% and business owners are those who are more likely and able to use accountants, investment advisors and lawyers when it comes to protecting their incomes. Their sources of income, potential exemptions and taxes are more complex. That also makes it easer to find loopholes, avoid and defer taxes. You can increase the tax rate but without looking at the entire structure of loopholes to offset an increase it will make little difference.
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Unless you have actual examples, what you just said above is just urban legend. Kind of like how Harper was muzzling scientists and how Mulcair was going to run budget surpluses.

[Merry]

High earning individuals in the 1% and business owners are those who are more likely and able to use accountants, investment advisors and lawyers when it comes to protecting their incomes. Their sources of income, potential exemptions and taxes are more complex. That also makes it easer to find loopholes, avoid and defer taxes. You can increase the tax rate but without looking at the entire structure of loopholes to offset an increase it will make little difference.

Unless you have actual examples, what you just said above is just urban legend.

I have given actual examples on more than one occasion, and been told that I'm either just "jealous" of the people whose situations I describe, or out and out "lying" about knowing such people. So it seems to me that folks like LV will always argue against tightening up the Income Tax system to make it fairer for all, no matter WHAT kind of evidence is produced.

The income tax rules regarding small business and privately owned Canadian Corporations were designed to help our economy move forward, by helping businesses thrive. They were never intended merely to help rich people shelter their income from tax. Yet that is what they are often used for.

I know one guy who has one legitimate operating business, and a whole host of "other" non operating numbered businesses that were created purely for tax purposes.

I know another guy who sold his business and retired, then transferred the capital into several non operating businesses, again purely for tax purposes.

And I know of a lady who had never been in business in her life (in the sense that we normally think of as "being in business") whose 2 million dollars (from a sizable life insurance policy, plus the sale of a house) is now in a non operating business in order to reduce the size of her tax bill.

To say that there is no tax benefit for what these folks are doing is ridiculous. Because they wouldn't be paying their high priced accountants and tax advisors to give them such advice, if they weren't benefitting from it. The question is, should they be allowed to shelter their sizeable financial resources from tax by using rules that were not originally designed for that particular purpose?

Rich people shouldn't be allowed to create non operating businesses (businesses that exist only on paper) in order to utilize tax rules originally intended to benefit legitimate operating businesses. If we want to take a look at making the income tax system fairer for everyone, then we need to design rules that fit each separate group's circumstances. Instead of allowing rich individuals with access to expensive accountants to hijack rules intended for an entirely different group of taxpayers.

Trudeau says he's going to fix this. And I hope he keeps that promise.