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January 2008 Archives

January 28, 2008

CRA Tax Tip: Cool cash for your tools!

Did you know…

That if you are a tradesperson (including an apprentice mechanic) you may be able to deduct part of your tool expenses? The tradesperson’s tools deduction provides employed tradespersons with an annual deduction of up to $500 to help cover the cost of new tools necessary to their trade. The deduction to be claimed on the 2007 tax return applies to the total cost of eligible tools in excess of $1,000 acquired by an employed tradesperson during 2007.

For more information on the tradesperson’s tools deduction, visit www.cra.gc.ca/individuals and select “T” from the drop-down menu for “Tradesperson’s tools deduction.”

For more information on this or other CRA Tax Tips, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080128-e.html

Posted by Taxes.ca Editorial Team [permalink]



January 28, 2008

CRA Tax Tip: Apprenticeship job creation tax credit

Did you know...

That businesses with an eligible apprentice may be able to claim the apprenticeship job creation tax credit? This is a non-refundable tax credit equal to 10% of the eligible salaries and wages payable to eligible apprentices for employment after May 1, 2006. The maximum credit is $2,000 per year for each eligible apprentice.

For more information about the credit, visit cra.gc.ca/individuals and select "A" from the drop-down menu for "Apprenticeship job creation tax credit."

For more information on this or other CRA Tax Tips, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080128a-e.html

Posted by Taxes.ca Editorial Team [permalink]

CRA Tax Tip - Service Complaints

The following tax tip is available from the Canada Revenue Agency web site.

Did you know that...

The Canada Revenue Agency has introduced a new complaint resolution process? If you have a service-related complaint that has not been resolved through our normal channels, you have the right to make a formal complaint about mistakes, undue delays, poor or misleading information, or staff behaviour through CRA – Service Complaints.

For more information, visit the Canada Revenue Agency Web site at cra.gc.ca/complaints.

For more information on this or other CRA tax tips, see:
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080128b-e.html

Posted by Taxes.ca Editorial Team [permalink]

January 25, 2008

Keep your records to support your tax return

The Canada Revenue Agency issued a new release on January 25, 2008 advising Canadians who plan to file their tax returns electronically, (or who do not submit information slips and receipts with their paper-filed return) to keep their tax records in case they are contacted by the Canada Revenue Agency (CRA).

Once tax returns are filed, the CRA begins work to verify the income reported, as well as the credits and deductions claimed. These reviews are an important way the CRA ensures that Canadians are paying their taxes. Last year, the tax returns of approximately 2.7 million individuals were reviewed and an additional $700 million in taxes was assessed by the CRA.

Some initial reviews of deductions and credits are conducted when returns are filed, and before taxpayers receive their Notice of Assessment. However, the majority of reviews take place later in the year, as the CRA works to verify the information on an individual's tax return and compare it with the information provided by other parties, such as an employer or a spouse or common-law partner.

For more information about on this news release and on reviews of tax returns by CRA, see:
http://www.cra-arc.gc.ca/newsroom/releases/2008/jan/nr080125-e.html

Posted by Taxes.ca Editorial Team [permalink]

January 24, 2008

Tax cheating is a crime

Released on the Canada Revenue Agency web site, Gordon O'Connor, Minister of National Revenue, and the CRA remind Canadians that not complying with the tax laws can result in serious consequences.


“Not paying your taxes is against the law,” said Minister O'Connor. “The Canada Revenue Agency works hard to identify and correct non-compliance. This keeps the system fair for the honest Canadians who comply with the tax laws.”

2006-2007, Canada Revenue Agency (CRA) criminal investigations led to convictions in 245 cases of tax evasion, or 98% of the files prosecuted. Courts imposed fines totalling $13.4 million and sentenced 26 offenders to more than 37 years in prison. Sentences for those who were ordered to serve jail time for tax-related offences ranged from 1 month to 3 years.

Convictions for tax evasion, including not filing tax returns and making false declarations, can result in court imposed fines of up to twice the taxes evaded, plus jail time. In addition, taxpayers still have to pay the taxes owed and all other civil penalties and interest imposed by the CRA.

For more information on this or other CRA news releases, see:
http://www.cra-arc.gc.ca/newsroom/releases/2008/jan/nr080123-e.html

Posted by Taxes.ca Editorial Team [permalink]

January 23, 2008

Toward a single tax rate

By John Williamson & Mark Milke

Don't believe the nattering nabobs who say Ottawa can't lower taxes. The Conservative government can – and should – table significant personal income tax relief in the federal budget.

According to the Organization for Economic Co-operation and Development (OECD) and even the federal finance department, Canada's personal income tax burden is the highest of all G7 nations. Canadians pay more income tax than the French and Italians, despite being neighbours with the lower-taxed United States. Income taxes in Canada are complex, relatively high and create significant economic distortions. There is an alternative.

Imagine a personal income tax form that could be easily completed without help from professional accountants or computer software. One that, in April of every year, allowed taxpayers to list their income; subtract basic, spousal and child deductions, and RRSP contributions, to calculate taxable income; apply a single rate to calculate tax owing; subtract the tax already paid; and pay the balance or collect any refund.

If Canadian taxpayers like the simplicity and fairness of this idea, they are not alone. Since the fall of the Berlin Wall in 1989, 15 eastern and central European countries have adopted variations of a flat-or single-tax model. In 2007, Iceland was the first western European nation to move to a single rate of income tax.

There are several reasons why Canada should aim for a single rate of tax. First, a single rate of tax if combined with vastly fewer deductions and credits would end complexity and thereby reduce compliance costs for taxpayers and administration costs for the federal government.

Second, the reality of fewer credits and deductions would allow for a lower overall single rate. Third, a single rate of tax is effectively progressive in a way that a multi-bracket system with multiple credits and deductions is not. The proponents of a multi-bracket system ignore the litany of exemptions that come with it. Those exemptions and deductions help to lower tax rates, especially for wealthy individuals.

In contrast, single-rate systems are progressive because the existence of a basic personal exemption means the higher one's income, the higher the proportion of one's income paid in tax. Consider Alberta, where the basic personal exemption was $15,435 in 2007 and where the provincial single-rate tax is 10%. At $20,000, the taxpayer paid out $456 in provincial income tax, representing 2.3% of income. At $100,000 of income, the tax paid was $8,456 and 8.5% of all income.

Two other benefits include reduced tax avoidance and superior incentives to work, save and invest under a flatter system.

To achieve such a model, the federal government will need to move in two steps. First, in stages between 2009 and 2012, the federal government should collapse the number of brackets from four to two rates of 15%, and 25% on income above $80,000. Canada currently has four income tax rates of 29%, 26%, 22% and 15%.

Over that same period, the basic personal and spousal exemptions should be raised to $15,000 each with the per child credit raised to $2,200. Concurrent with such a reform, most other deductions and tax credits should be eliminated with the exception of universal deductions and credits that pertain to charitable giving, RRSPs, seniors and a handful of disability amounts.

The tax relief is substantial. Adopting this two-rate plan will deliver $68.8-billion in personal income tax relief over four years. It is based on prudent assumptions and is achievable without running budgetary deficits.

And according to the Toronto-based C.D. Howe Institute, the federal government can accommodate such a tax regime merely by restraining federal spending to 2.5% growth per year starting in 2008. If it can slow annual spending increases, Ottawa could deliver the two-rate tax cut plan, run a surplus in 2012 and still have an additional $3-billion available for debt reduction that year.

It makes sense for Canadians to eventually pay one federal rate of tax. So the second stage, post-2012, would involve moving to a single rate as budgetary conditions allow. This cannot be done overnight, but we should begin implementation as soon as possible. A fairer tax and a healthier economy will be the result when we do.

John Williamson is the federal director for the Canadian Taxpayers Federation. Mark Milke, a former provincial director with the CTF, lectures in political science at the University of Calgary. They are the authors of Lower, Simpler & Flatter – Towards a Single Tax Rate for Canada, available at: www.taxpayer.com.

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

January 17, 2008

Two federal income tax rates of 15% & 25%

- Slow Ottawa’s annual spending growth to 2.5% and it is possible by 2012
- A pro-growth plan that will deliver nearly $70-B in personal tax relief

Budget impact costed by the C.D. Howe Institute

OTTAWA – The Canadian Taxpayers Federation (CTF) today released a groundbreaking study urging the federal government to enact a multi-year tax reform/relief plan. The report calls on Ottawa to reduce personal income taxes and cut the number of tax brackets from four to two while maintaining only a handful of deductions like RRSP, spousal and child allowances. The goal is to both simplify the tax code while lowering the personal income tax burden in a manner that strengthens the Canadian economy. The report does not deal with corporate tax reform, nor does it redefine how investment income is taxed.

The study, entitled Lower, Simpler & Flatter – Towards a Single Tax Rate for Canada, authored by Mark Milke and John Williamson, argues the federal government should embark on comprehensive tax reform with the ambition of adopting a single personal tax rate. As an immediate first step, the authors recommend that Canada move to two federal income tax rates of 15% and 25% by 2012. There are currently four tax rates of 29%, 26%, 22% and 15%.

“Our immediate objective is to usher in two tax rates on personal income so no taxpayer will pay more tax and most will pay less,” CTF federal director John Williamson said today at a news conference on Parliament Hill. “The tax relief is substantial. If this two rate plan is implemented by the federal government it will mean a $25-billion annual personal income tax cut as of 2012.”

The C.D. Howe Institute conducted an independent analysis of this plan’s fiscal impact on government revenues and its affordability by 2012. The think tank also calculated the positive tax relief generated on households that result from adopting two income tax rates while eliminating many tax credits.

Finn Poschmann, the Institute’s director of research, concluded, “The tax relief proposed by the CTF is readily affordable by 2012, provided modest spending restraint is undertaken by the federal government … Restraining federal spending to 2.5% nominal growth per year, beginning in 2008, would produce planning surpluses of $21.9-billion and $28.1-billion [in fiscal 2011/12 and 2012/13]. This implies that personal tax relief of $25-billion per year is possible by 2012, while setting aside $3.0-billion annually for debt reduction and without running a fiscal deficit.” (The C.D. Howe’s Impact of Fiscal Measures is included in the report.)

“The decisions Finance Minister Jim Flaherty makes in the upcoming budget will determine the size of tomorrow’s income tax cut,” noted Williamson. “If the Conservatives exercise modest spending restraint they will finally be able to deliver meaningful personal income tax relief. We must not forget that Canada has the highest personal income tax burden of G7 nations, yes even higher than the French.”

Under the two rate model proposed by the CTF, by 2012:

Approximately 1.4 million low-income Canadians will be removed from the tax rolls as a result of all individuals earning $15,000 or less not paying any federal income tax. Income over $9,600 is currently subject to federal income tax under Ottawa’s existing tax system;

Every category of taxpayers – one-earner and two-earner households, married people with or without children, unattached singles with or without children, and seniors – representing 30 million Canadians, will pay less income tax or the same amount;

The basic and spousal exemptions are each $15,000 and there is also a per child exemption of $2,200. As such, two-parent families with two kids will not pay any federal income tax until their combined income exceeds $34,400. Today, this household is subject to tax on income at $23,200. A single parent with three children will pay no federal tax on the household’s first $21,600 of income. Federal tax is currently applied to this family’s income above $15,600;

To ensure low- and moderate-income senior citizens pay no additional income tax there is an age credit; and

RRSP deductions remain intact along with those for charitable giving.

“This tax relief is proportional. The more an individual or household earns the higher the tax savings will be. This is welcome because the middle class and high earners pay the majority of tax in Canada,” said Mr. Williamson. “Ottawa should stop punishing people for working hard.”

According to Statistics Canada, in 2002, the top 10% of taxpayers paid 52.6% of total federal income tax, up from 46% in 1990. Entrance to the “Elite 10% Club” began at $64,500 a year.

“The system also remains progressive as a result of generous personal and family exemptions. As a result, an individual’s or household’s share of taxes rises as more income is earned,” noted Williamson. “A common economic fallacy is that only tax systems with steep multi-tax rates are progressive when a single-rate tax with generous allowances can accomplish the same objective.”

Williamson concluded, “Lowering tax rates sends the important signal that entrepreneurialism, risk taking and hard work are positive endeavours to be encouraged. This is something Canada’s current income system with punitive tax rates fails to do. This two rate tax proposal is a pro-growth plan that will deliver nearly $70-billion in personal income tax relief over the next four years. It is based on prudent assumptions and is achievable without running budgetary deficits.”

An electronic copy of Lower, Simpler & Flatter – Towards a Single Tax Rate for Canada is available at: http://www.taxpayer.com/pdf/flat_tax_2008.pdf

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

January 17, 2008

CRA Tax Tip: Claiming medical expenses

The Canada Revenue Agency has posted the following tax tip available at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2008/tt080115-e.html

Did you know… That you can claim, as a non-refundable tax credit, medical expenses for yourself, your spouse or common-law partner, and your children born in 1990 or later? For 2007, the total expenses have to be more than 3% of your net income, or $1,926, whichever is less.

You may also be able to claim medical expenses for the following persons if they depend on you for support:

- you or your spouse or common-law partner's child or grandchild who was born in 1989 or earlier; and
- you or your spouse or common-law partner's parent or certain close relatives who lived in Canada at any time in the year.

For more information on medical expenses, visit www.cra.gc.ca/tax/individuals and select "M" from the drop-down menu for "Medical expenses".


Posted by Taxes.ca Editorial Team [permalink]

January 14, 2008

CRA Tax Tip: The age amount has increased

The following tax tip was provided by the Canada Revenue Agency.

Did you know…

That if you were 65 or older on December 31, 2007, and your net income was less than $65,449, you can claim the age amount? You may also be able to transfer unused portions of the age amount to your spouse or common-law partner.

For more information, visit www.cra.gc.ca/individuals and select “A” from the drop-down menu for “Age amount.”

Posted by Taxes.ca Editorial Team [permalink]

January 12, 2008

Government of Canada delivers on the promise of the Softwood Lumber Agreement

$467 million in export charges paid to 6 provinces

In a Canada Revenue Agency News Release, Minister of National Revenue Gordon O'Connor has announced that the CRA has distributed close to $470 million in revenue to six provinces from charges on exports of softwood lumber products destined for the U.S.

According to the release:

"The six provinces whose products may be subject to the export charge under the September 2006 Canada-U.S. Softwood Lumber Agreement (SLA) are: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Quebec. Exports of softwood lumber products from the Atlantic provinces are not subject to the export charge."

For more information, see:
http://www.cra-arc.gc.ca/newsroom/releases/2008/jan/nr080111-e.html


Posted by Taxes.ca Editorial Team [permalink]

January 10, 2008

CRA Tax Tip: Pension Income Splitting

The Canada Revenue Agency has provided the following Tax Tip on its web site.

Did you know...

That you could benefit from the new pension income splitting tax measure? When you and your spouse or common-law partner file your 2007 income tax returns, new tax rules allow eligible taxpayers to allocate up to half of their eligible pension income (income that qualifies for the pension income tax credit) to their lower-earning spouse or common-law partner.

To make this election, you and your spouse or common-law partner must each complete Form T1032, Joint election to split pension income.

For more information on pension income splitting, visit www.cra.gc.ca.


Posted by Taxes.ca Editorial Team [permalink]

January 5, 2008

Canada-U.S. Free Trade Agreement: 20 years later

As 2008 comes in, we witness the 20th anniversary of the signing of the Canada-U.S. Free Trade Agreement. To mark this miletstone, the Canadian Centre for Policy Alternatives (CCPA) Executive Director Bruce Campbell has written 20 Years Later: Has Free Trade Delivered on its Promise?, a study examining what's happened since and finds free trade's biggest boosters have grown wealthier but promises of better jobs and rising living standards fell short. According to the CCPA web site, "the study takes a sample of 41 Canadian Council of Chief Executives (CCCE) member companies – the leading supporter of free trade – and finds they shrank their workforce by 19.6% while their revenues grew by 127%."

The news release and the study can be downloaded from the CCPA web site at http://www.policyalternatives.ca

Posted by Taxes.ca Editorial Team [permalink]

January 3, 2008

Tax Savings in ’07 (Especially for Families) and Dips Down Again in ’08

Taxpayers Hope Next Budget will Cut Rates

Provincial Winners: Newfoundland, Quebec & B.C. The Loser: New Brunswick

Ottawa: The Canadian Taxpayers Federation (CTF) today released projected income, payroll and sales tax changes kicking in on January 1st, 2008. Also calculated are retroactive personal income tax changes – which apply to the 2007 tax year – announced by the finance minister in the fall economic statement that saw the bottom income tax rate fall to 15% from 15.5% and the basic personal exemption – the amount a person can earn before they pay federal income tax – increase by $671, from $8,929 to $9,600.

“Due to retroactive tax changes announced in the fall, coupled with changes that take effect in the New Year, almost all taxpaying Canadians will pay the Taxman less in 2007 and 2008. The exception is in New Brunswick,” stated CTF federal director John Williamson. “Thanks to the broad-based tax relief announced in the economic statement, the average taxpayer’s retroactive tax savings this year will be $223. This will climb to $272 after factoring in changes that take place next year. Families will save even more thanks to a new child credit worth $300 per child and a higher spousal exemption, which were also enacted for the ’07 tax year. Plus let’s not forget the January 1st GST reduction. While harder to quantify, it will save the typical Canadian household between $150 and $200 annually.”

“But taxpayers shouldn’t clap too loudly as Ottawa’s ‘new’ 15% rate simply restores the lowest income tax rate to what it was in 2005 before the Conservative finance minister raised it in his first budget. Jim Flaherty should be working to cut personal income tax rates, not patting himself on the back for returning them to the level they were when he came into office.”

To see the income and payroll tax changes in 2007 and 2008 for various income levels, households and for all 10 provinces go to Chart #1 at: http://www.taxpayer.com/pdf/2008_tax_burden.pdf

Tax Relief in 2008 – Only Modest Gains due to Indexation

Additional tax reductions next year are due mostly to the indexation of the personal income tax brackets. Other specific tax changes include:

Payroll Taxes: Minuscule EI Reduction and Bigger CPP Bite

Effective January 1, 2008, the employee rate per $100 of insurable earnings will be adjusted to $1.73, a reduction of 7 cents from its current level of $1.80. The corresponding employer rate will be adjusted to $2.42, a reduction of 10 cents from its current level of $2.52. The maximum insurable earnings will rise from $40,000 to $41,100 which is the ceiling up to which EI premiums are collected. Employees will therefore pay a maximum of $711.03 and employers $994.62 for a total EI payment of $1,705.65.

“With a $3.3-billion surplus in the EI fund last year, Ottawa should cut rates and match EI revenues to EI payments, allowing for only a modest reserve, and harmonize the employer rate with those of employees,” said Williamson. “Cutting this tax will help job creation and give manufacturers a break at a time when they are struggling with dollar parity.”

Under the Canada Pension Plan, the maximum pensionable earnings for 2008 will be $44,900 (up from $43,700 in 2007) and the basic exemption amount will remain unchanged at $3,500. The employee and employer contribution rates will each remain unchanged at 4.95%. Because the contribution rate is staying the same while the threshold (ceiling) increases, most taxpayers will pay slightly more in CPP payments in 2008. Employees and employers will each pay a maximum of $2,049.30 for a total CPP payment of $4,098.60.

See Chart #2 for EI and CPP tax payments and increases: http://www.taxpayer.com/pdf/2008_payroll_Taxes.pdf

“The net payroll tax bill on workers will increase because the EI tax reductions will be gobbled up by a higher EI threshold and rising CPP payments. Average worker will pay $50.43 more in payroll taxes and employers $46.02 more,” said Williamson. “Ottawa is wrong to increase the EI tax ceiling when the program continues to amass surpluses. It is another example of giving a tax break with one hand, by lowering the EI tax rate, and taking it away with the other, by raising the threshold.”

A 5% GST is a $5-billion Annual Tax Savings

The GST will be reduced by a further one percentage point on January 1, fulfilling the Conservatives’ marquee pledge to reduce the tax by two points. This additional cut will save the average household between $150 and $200 annually. “While some have criticized cutting the GST, it is a broad-based tax cut that puts $5-billion back in the pockets of over-taxed Canadians,” observed Williamson. “And given that this is the second point cut, the total household savings will be between $300 and $400 each year. This is good news particularly since $10-billion in the pockets of Canadian consumers is preferable to Ottawa hoarding the cash.”

Provincial Income Tax Changes

Three provinces have additional relief coming to its taxpayers in the New Year. Newfoundland and Labrador reduced all provincial income tax rates and has eliminated its provincial surtax altogether. The typical taxpayer will save $420 in provincial and federal taxes next year (plus GST savings). Quebec rates remain the same although the thresholds have increased substantially which will result in the largest tax savings in the country as of January 1st. The average Quebecer will pay $500 less next year (plus any GST savings). The tax savings will increase in each province as incomes rise above $45,000. Meanwhile, British Columbia has cut all of its provincial income tax rates except the top one which also results in additional savings. As such, average taxpayers in Lotus Land save $223 (again, plus GST savings).

New Brunswick’s provincial income tax increase in 2007 means all individuals earning more than $52,700 paid more income tax this year. Individuals with incomes below $52,700 paid less thanks to federal tax reductions, but their savings were smaller than other Canadian taxpayers because of the province’s tax hike.

See Chart #3 for provincial tax rates/comparisons: http://www.taxpayer.com/pdf/2008-provincial_taxes.pdf

More Relief Needed to Eliminate Structural Over-taxation

While the tax relief announced in Ottawa’s annual economic statement was a good start, Canadians remain over-taxed. “More must be done to reduce personal income taxes. It is not sufficient for parliamentarians to only discuss cutting taxes for low-income Canadians. According to the OECD and even Canada’s finance department, our personal income tax burden remains the highest of the G-7 nations. This standing has not changed in almost a decade and means the French and Italians pay less personal income tax than Canadians,” noted Williamson.

“Broad-based tax relief is necessary to ensure all income levels benefit from lower taxes. Ottawa must focus on further reducing personal income taxes in the 2008 budget and we can suggest several options. At a minimum the Conservative government could chop the two middle rates of 26% and 22% a point each and raise the income threshold at which the top rate of 29% begins to apply to $200,000,” Williamson said. “This proposal can hardly be called radical as it was the tax relief model the Liberals campaigned on in the last election.

“Liberal leader Stephane Dion would have a hard time voting against his party’s own tax proposal if Minister Flaherty were to enact it in the next budget. While the Liberal caucus might squirm, it would be a good tax cut for overburdened Canadians. The goal is to lower income taxes and very few taxpayers will complain if it means implementing the Liberal’s old plan under a Conservative banner.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

Cut Taxes to Strengthen the Economy

By Adam Taylor and John Williamson

NEWS ALERT: Finance Minister Jim Flaherty will not table a budget in 2008. At a campaign-style event to draw attention to the Jan. 1 GST cut, Prime Minister Stephen Harper dashed hopes for additional tax relief. “We’re not going to undertake any long-run spending or tax-reduction initiatives unless we feel they are affordable,” he said. Budget reporters zeroed in on the dark economic clouds south of the border and concluded tax relief and spending initiatives are off the government’s agenda. Mr. Flaherty it seems can rest easy, his services are not needed.

Or are they? With a looming spring election, the unreported paradox is why would Messrs. Harper and Flaherty be publicly promoting their tax relief agenda as an economic tonic while simultaneously downplaying the likelihood of additional tax cuts when they will be most needed? That is, in either an economic slowdown or election battle. Are we to believe the Conservative government will throw away its fiscal card and instead fight the election on medicare, climate change and government integrity while financial conditions worsen? That is hardly sound policy-making or, for that matter, a wise re-election strategy.

It is probably too much to hope the next round of tax reductions will match Mr. Flaherty’s fall economic update. It cut taxes an impressive $60-billion by substantially lowering business taxes, reducing the GST to 5%, and reversing the personal income tax increase the government enacted in its first budget in 2006.


Those recent changes are a step in the right direction, but hardly taxpayer nirvana. As a result of the bottom income tax rate returning to 15% from 15.5% and a higher basic personal exemption (what a person can earn before paying federal income tax), an individual’s average income tax bill will fall by $223 in the ’07 tax year. The savings will repeat in 2008.

Families with children fare better. Thanks to a new child credit worth $300 per child and a higher spousal exemption – both enacted in the 2007 tax year – families with two kids, including single parents, save between $800 and $900 a year in income taxes (and keep adding $300 for every additional child under 18 years old).

Lowering the GST by two points will save the average household an additional $300 to $400 annually. Most economists criticized cutting the GST. Globe and Mail columnist Jeffrey Simpson went overboard, calling it “the worst piece of fiscal policy in a quarter of a century.” Worse, readers are to presume, than government policy of carelessly racking up $467-billion in debt over the past 25 years!

There is no reason why the GST cannot be reduced along with other federal levies as Ottawa lessens the tax burden on Canadians. Now that the government has fulfilled its GST promise, the Conservatives should turn to cutting the taxes that matter most – personal income rates.

Over the next six fiscal years, the federal surplus will exceed $50-billion. As such, there is ample room for the government to continue cutting taxes. There is no need for additional spending beyond inflation and population growth. According to the fall economic update, at the end of the 2008/09 fiscal year the three-year spending increase will exceed $32-billion. That is a cumulative increase of 18.5% in the size of the federal government since the Conservatives came to office.

Canadians remain over-taxed: Mr. Flaherty has said so himself, repeatedly. More needs to be done to ease this country’s heavy tax load. According to the Organization for Economic Cooperation and Development (OECD) Canada has the highest personal income tax burden of G-7 nations. Despite the location of a low-tax jurisdiction south of the 49th parallel, Canadians pay more income tax than the French and Italians do!

To correct this problem, Minister Flaherty needs to reduce Canada’s high marginal income tax rates. He should begin by cutting the two middle tax rates of 22% and 26% by one point each and raise the income threshold at which the top rate of 29% begins to apply to $200,000. If this plan sounds familiar it is because the previous Liberal government proposed it in its dying days and campaigned on it in the last federal election.

Politically, the Grits might squirm if forced to vote for or against a tax proposal they authored. But that should not be the primary reason for enacting it. Rather, it is a good tax cut for Canadians and will help the economy. The goal is to lower tax rates and very few taxpayers will complain if it means implementing the Liberal’s old plan under a Conservative banner.

Budget 2008 is the time to offer personal income tax relief. If the economy slows – as experts predict – taxpayers and businesses will be better able to cope paying less tax. The Conservatives should put the economy ahead of government spending and take care to ensure Canada’s wealth creators continue to generate jobs. A federal bureaucracy that has become 50% more costly since 1997 will not keep the economy afloat but the taxes needed to sustain it are an economic drag. In the same vein, Ottawa can do with fewer handouts to businesses and special interest groups.

With or without a slump, the government needs to spend less, spend more wisely and cut income taxes to ensure the country remains strong and our prosperity continues. Mr. Flaherty has his work cut out for him – the next budget will be the government’s most important fiscal test yet.

Adam Taylor is research director and John Williamson is federal director of the Canadian Taxpayers Federation.

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

CRA News Release: Resolve to correct your tax information

According to the CRA web site, "last year the CRA processed 8,244 disclosures for taxpayers who used the Voluntary Disclosures Program and got a second chance to comply with their tax obligations. Coming clean saved these taxpayers from an audit or a criminal investigation, which can result in penalties, fines, and even jail time. Their valid disclosures involved more than $525 million in taxes."

The CRA is advising Canadians to "Begin the New Year with a clean slate and a clear conscience!"

The Canada Revenue Agency's (CRA) Voluntary Disclosures Program allows people to come forward and correct their tax information and, thereby, avoid being penalized, criminally investigated and/or prosecuted.

For more information on this news release, visit the CRA web site at http://www.cra-arc.gc.ca/newsroom/releases/2008/jan/nr080103-e.html

Posted by Taxes.ca Editorial Team [permalink]

January 2, 2008

Canada's best paid 100 CEOs will have pocketed the national average wage of $38,998 by 10:33 am on January 2nd

Today the Canadian Centre for Policy Alternatives released The Great CEO Pay Race, by Hugh Mackenzie. According to the CCPA, the study finds that Canada's best paid 100 CEOs will have pocketed the national average wage of $38,998 by 10:33 am on January 2nd.

The news release for the study appears below and along with the CEO report (and an online tool to find out how quickly the top 100 CEOs earn your salary) all are available at www.growinggap.ca and www.policyalternatives.ca.

From the CCPA web site:

New Year’s party still going for top CEOs

TORONTO – By the time most Canadians roll up their sleeves to begin a new year of work, Canada’s best paid 100 CEOs will already be having a good year: They’ll pocket the national average wage of $38,998 by 10:33 am January 2nd.

And they will continue to earn the average Canadian wage every nine hours and 33 minutes for the rest of the year, according to a new report on CEO pay by the Canadian Centre for Policy Alternatives (CCPA).

“Most Canadians are heading back into work with a mound of Christmas bills and financial worries but for Canada’s best paid 100 CEOs it’s like Santa Claus delivers every nine hours,” says the report’s author, CCPA Research Associate Hugh Mackenzie.

“That’s what happens when you make an average of $8,528,304 – which is the average of what Canada’s 100 best paid CEOs made in 2006.”

On average, the best-paid 100 CEOs make more than 218 times as much as a Canadian working full-time for a full year at the average of weekly employment earnings.

“That represents a significant gap between the rich and the rest of us – especially the working poor who earn the minimum wage,” Mackenzie says.

By 1:04 p.m. New Years’ Day, the best paid 100 CEOs pocketed what will take a minimum wage worker all of 2008 to earn. Every four hours and four minutes, they will keep pocketing the annual income of a full-time full-year minimum wage worker.

“We have to ask ourselves, are those at the top of the income heap really worth so much? And are those at the bottom really worth so little?”


Posted by Taxes.ca Editorial Team [permalink]