Date of publication: Apr 7, 2022 • 40 minutes ago • 4 minutes reading • 37 comments Justin Trinto, Prime Minister of Canada, holds a copy of the federal budget in Ottawa, Ontario, Canada on Thursday, April 7, 2022. Photo by David Kawai / Bloomberg
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OTAWA – More than a quarter of Canadians who earned more than $ 400,000 in 2019 paid less than 15 percent in federal tax in 2019, a staggering number forcing the Liberal government to reconsider taxing the highest-income people in Canada. .
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“Some high-income Canadians still pay relatively little personal income tax (PIT) as a share of their income – 28 per cent of gross archivists with more than $ 400,000 gross pay an average federal rate of less than PIT 15 or less. “than some middle-class Canadians pay,” said the 2022 federal budget released on Thursday. In the document, Finance Canada reveals new data based on 2019 tax data showing that nearly 18 percent of Canadians who earned $ 400,000 in gross income that year – or 0.5 percent – paid less than 10 percent. one hundred (and sometimes even 0 percent cents) in federal tax. Another 10 percent of wealthy Canadians paid up to 15 percent, which is essentially the first tier of income tax for the federal government. The remaining 78 percent of the country’s 0.5 percent higher income in 2019 paid more than 15 percent in federal tax.
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“There are still thousands of wealthy Canadians who pay minimal to no staff income tax each year. “This is unfair and the federal government is committed to changing it.” While many in this 28 percent have paid less tax quite legally, the government is concerned that many more have found ways to make far more deductions in their income than they should. “These Canadians make significant use of rebates and tax rebates and usually find ways to tax large amounts of their income at lower rates,” the budget states. But that is where Canada’s little-known Alternative Minimum Tax (AMT) provision begins. The Royal Bank of Canada defines AMT as a secondary means of calculating income tax that should “prevent high-income earners and trusts from paying little or no tax.” the result of certain tax incentives, including claiming certain tax deductions and obtaining Canadian dividends and capital gains. “
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But the federal government admits that the AMT, which has not been substantially updated since 1986, is not working. So now he is looking for a new minimum tax system that he wants to “go further” by ensuring that wealthy Canadians “pay their fair share of the tax.” The budget does not contain details other than that more will come this fall, but tax experts say this is a very interesting move by the Liberals to tackle inequalities in the tax system. Jamie Golombek, CEO of Taxation and Wealth Planning at CIBC, said he was very surprised to see that 28 percent of wealthy Canadians paid so little in federal tax in 2019.
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“That number seems crazy to me,” Golombek said. “We have an AMT, it affects very few people, literally, at the end of the day; and it obviously does not capture enough people in their opinion.” “This is very interesting,” he added. Greg Bell, a KPMG tax expert, says Finance Canada needs to dive deeper into how so many wealthy Canadians have managed to reduce their gross income so much in their tax returns. “The first question that comes to my mind is, if they have an income of more than $ 400,000, how do they make their tax rates so low?” He said. But the AMT revision is just one of many tax measures in the latest federal budget designed to address what experts call gaps that have allowed some companies or wealthy individuals to pay lower taxes than they should in the eyes of the government.
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For the most part, experts agree that most of the measures are tantamount to “household” or simply fixing known issues or gray areas in federal law. “They have this list of things they do not like and when (an issue) gets serious enough, they pursue it,” Golombek said. The most significant change for state coffers announced in this budget is the one that would ban private Canadian companies from using foreign companies, such as overseas-based shell companies, or relocating to a tax haven even though they still own and fully controlled by Canadians, to avoid payment Canada’s tax rates. The government estimates that the proposal will raise $ 4.2 billion over five years, starting in 2022-23.
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The budget also expects to recover about $ 135 million a year in the future, closing the gap in the “double discount” that allows companies to claim dividends on stakes that they pay and bet on. Another $ 150 million a year is expected to return to state coffers by tightening anti-avoidance rules to ensure Canadians pay their fair share of taxes when using the so-called interest coupon waiver agreement. “Due to differences between different Canadian tax conditions, interest received by Canadians is often subject to different tax rates depending on the recipient’s place of residence. “Interest-deductible agreements take advantage of these differences and allow some to pay lower taxes,” the budget states. Finally, the budget promises to review and strengthen federal rules aimed at preventing abusive tax evasion, although no further details are provided.
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