24 Aug BizTAX Tax Tips: The Mission
Two sets of eyes peered at me expectantly with expressions of wonderment on their faces, and their breath caught in their throats.. waiting for the good news about their impending arrival. Their “arrival” was, of course, their tax refund.. which I was calculating as their Tax Accountant. “Umm, it looks to be about $2,672” I stated. A look of glee shot across their faces.. “great!, we can pay for our family vacation to Disneyworld with that money!” she exclaimed. The gentleman made a salary of $160,000 a year. The lady made just over $80,000 in salary. The peculiar part was their joyful pavlovian response at the thought a tax refund of roughly 4% of the tax figure..the government merely throwing the taxpayer a bone, after foreclosing on the doghouse.
I asked quietly “Do you realize how much you paid in taxes this year”? The question hung in the air. As I read out the total tax figure, they looked at me in dumbfounded amazement. They paid a total of about $75,000 in tax. So after a year of sacrifices, blood, sweat, tears and toil; they were paying the equivalent of house down payment per year in taxes. It broke my heart to report to them the amount of income tax they were paying. It just seemed.. well.. criminal.
Have Canadian taxpayer’s become the proverbial “frog in the pot”, a theory which states that if you drop a frog in a pot of boiling water, it will of course frantically try to clamber out. BUT, if you place it gently in a pot of tepid water and turn up the heat slowly, it will float there quite placidly. As the water gradually heats up, the frog will sink into a tranquil stupor, exactly like us in a hot bath, and before long, with a smile on its face, it will unresistingly allow itself to be boiled to death… or in our case.. TAXED TO DEATH.
Income tax doesn’t have a long history in Canada; the country has only utilized income tax to fund government activities since World War I. The history of Canadian income tax may be short, but it is filled with complex and fascinating moments. Prior to 1917, the Canadian government did not charge income tax. During this time, Canada relied on money from tariffs and customs, known as consumption taxes, to provide revenue. By 1917, the cost of participating in World War I had become too great, and the government was forced to “temporarily” (yeah, right!) adopt an income tax system in order to finance the war effort. What was going to be a “temporary” measure is now the largest form of income available to the Canadian government.
According to the Fraser Institute’s annual Tax Freedom Day calculations, Canadians celebrated Tax Freedom Day on June 5th, 2010 this past year, three days later than the prior year.. and 155 days into the year! This is fully 46.47% of the year. Tax Freedom Day is a representation of the amount of tax the average Canadian family must pay to all levels of government. Shockingly, if Canadians were required to pay all of their taxes up front, they would have to pay each and every dollar they earned to governments until almost mid-year… like it or not, taxes are the LARGEST SINGLE EXPENSE of most families.
Canadians pay too much tax. This is not news to anyone. You don’t need a study to tell you that taxes are gobbling up a huge portion of your income. According to Dave Park, Chief economist of the Vancouver Board of Trade “The amount collected in relation to gross domestic product in Canada is the highest of all G8 nations. Our taxation is extremely high. The growth in the economy had all been funneled into government. If you look at this last federal budget, they increased their expenditures by 5.8 percent… this is more than the economy grew! We’re spending more than we made..That’s totally unsustainable.”
Government waste is a given. It involves politicians and fat-cat bureaucrats spending our money with little accountability. There’s simply no way, particularly at the federal level, of monitoring how much is being spent and whether that money is being used wisely.
It seems hopeless, BUT there IS something you can do.. in fact, it is YOUR RIGHT; as enshrined in the Canada Revenue Agencies “Taxpayer Bill of Rights”. It says:
You have the right to pay no more tax than what is required by law
And so starts the mission of this space.. a place to share with you, my readers, in clear, simple language free of accountant and tax-lawyer mumbo-jumbo; just this:
The most cutting edge strategies devised to pay the lowest taxes legally possible.