Don't We All Legally Avoid Paying Tax?
John McIlroy
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Right around tax season stories like the one CBC published last week are common: CBC INVESTIGATES: Number of highest-earning Canadians paying no income tax is growing."
Sounds bad. While we working drones dutifully pay our taxes, the wealthy get off scot free. And it's getting worse every year. We can imagine the author in the CBC building on King St., shaking her fist at Bay Street. Someone, somewhere has to make the rich pay. The outrage has gone on long enough.
It's the same old story. Slick 1% operators employ a cadre of accountants and tax advisors to "legally" avoid paying tax. But that hardly removes the sting. We all dream of finding loopholes to keep the tax man at bay. We might dream, but the 1% make it happen. Or do they? Isn't legally avoiding paying tax another way of saying a taxpayer has paid the taxes owed?
Besides, why is CBC focusing on high earners? Don't we ALL legally avoid paying taxes? How many readers make RRSP contributions, but on principle ignore the deduction to make sure they don't legally avoid paying tax? Hmmmm... not many hands went up. How about selling your home as principle residence? Do some people treat the gain as ordinary income and pay full tax to make sure they don't legally avoid paying taxes? Didn't think so. And of course, for the CBC, depositing money in a tax free savings account must be a moral outrage.
More examples abound: registered education savings programs, medical expense tax credits, home renovation tax credits, family caregiver tax credits, and let's not forget the volunteer firefighter and search and rescue tax credits. Are volunteer firefighters next on the CBC hit list? Should they be slinking around in deep shame for legally avoiding paying tax?
The CBC needs to stop abusing the idea that complying with tax law is "exploiting the system." While CBC doesn't use the phrase "tax loop holes" that is the idea being suggested. Tax loopholes do exist, but their lifespan is short. Finance shuts them down quickly. A loophole is an unintended legal way to avoid paying taxes. Are the principle residence exemption or RRSP deduction examples of tax loopholes or "special deals"? Of course not. They are features of the tax system, not bugs. They were introduced after careful deliberations of the government who set tax policy for the nation. Many high earners avoid paying tax by carrying forward large losses from previous years. That is not a loophole or special deal. It is a carefully designed feature of the system. It was introduced because the government of the day felt it advanced the public good.
Tax compliance is what the government wants. Tax evasion is illegal and results in significant penalties. Tax avoidance is in the middle. Tax avoidance involves clever exploitation of the rules by a taxpayer who carries out a transaction that is legal, but abuses the spirit of the Income Tax Act. Healthy debate exists in the tax community over how aggressive taxpayers and CRA can and should be in pursuing and defeating tax avoidance transactions. But most activities discussed in the CBC article don't even meet the threshold of tax avoidance. They involve carefully designed features of the system, similar to the principle residence exemption, that were enacted for the benefit of all Canadians.
Most rational Canadians avoid paying tax they don't owe. If they decide to contribute to worthwhile causes they do so outside the tax system. Nobody pays taxes they don't owe! So why is the CBC targeting high earning Canadians for doing exactly the same thing all Canadians do... paying taxes they owe and no more?
CEO, Board Member, Father, Husband , Encourager, Chief Creative Officer
8yTax law is complex and multi faceted the professionals who represent themselves as experts owe it to their consumers to understand and provide more holistic solutions it's inappropriate to call your self an advisor when really all you do is fill out the forms. And take the easy low hanging fruit route... But as usual the media prefers to focus on the scapegoat or the superficial perception than get to the root and truly make a difference
CEO, Board Member, Father, Husband , Encourager, Chief Creative Officer
8yWell written the laws were written for a purpose to understand them and work within them isn't illegal I would suggest that not knowing the law and living in ignorance of the law is not noble but.... Well I will let people draw their own conclusions. Honestly the ones at fault and who should be being targeted are many of the professionals who represent themselves as tax advisors no slight intended toward the author, much of the unnecessary taxes paid by the majority are based on the lack of knowledge and experience and thoughtfulness of the advisors. Many of the tax savings opportunities are easily accessible if the advisors take the time to connect all the dots and make them available to the average consumer. Between all the vehicles available to shelter your hard earned income it should be the obligation of the advisor to understand all aspects of tax law and design more comprehensive solutions that aren't maybe as convenient for the advisor or simple but better and more valuable to the consumer