Tax us fairly

The Southern Gazette - - EDITORIAL -

It sounds a lit­tle, well, a lit­tle scat­o­log­i­cal: in­come sprinkling. But it’s some­thing that has been go­ing on in Canada’s tax sys­tem for years. Here’s how it works: some­one who runs a pri­vate busi­ness, in­stead of tak­ing a large salary and pay­ing taxes in a high-salary bracket, can spread, or “sprin­kle,” that salary around over a num­ber of fam­ily mem­bers who would then pay taxes at a lower rate.

For those who can avail of the method, it’s quick way to keep money from the tax­man.

The prob­lem? Well, it’s not avail­able to the av­er­age Joe or Jane work­ing at an or­di­nary job.

Many pro­fes­sion­als — doc­tors, lawyers and ac­coun­tants — have formed pri­vate com­pa­nies for ex­actly that tax ad­van­tage. In all, the fed­eral gov­ern­ment es­ti­mates 50,000 fam­i­lies are now re­ceiv­ing a tax ben­e­fit from the method.

If the fed­eral Lib­er­als stay the course, it’s some­thing we can ex­pect to come to a screech­ing halt.

Other tax changes the Lib­er­als are propos­ing in­clude putting an end to the prac­tice that lets peo­ple avoid taxes by keep­ing in­vest­ment prof­its inside a busi­ness — busi­ness in­come is taxed at a lower rate — and pro­tect­ing cap­i­tal gains by shift­ing them through a num­ber of com­pa­nies.

The in­come sprinkling change alone would bring in some­where be­tween $250 mil­lion and $500 mil­lion in fed­eral and pro­vin­cial taxes, which doesn’t sound like a lot of money, in the big pic­ture.

But what’s im­por­tant in the big pic­ture is fair­ness in the Cana­dian tax sys­tem. If peo­ple are go­ing to be taxed on their in­come, and taxed at a pro­gres­sively higher rate as they earn more and more money, than the com­par­i­son of those in­comes should be on an ap­ples-to-ap­ples ba­sis.

No one should get special or dif­fer­ent tax treat­ment based on their abil­ity to form a cor­po­ra­tion and shift in­come around.

Crit­ics com­plain that the tax changes — par­tic­u­larly the ban on “sprinkling” — some­how lim­its en­trepreneur­ship. There have even been sug­ges­tions that tax­ing ev­ery­one on the same ba­sis will drive busi­nesses to ju­ris­dic­tions that don’t have the same tax sys­tem.

Well, usu­ally en­trepreneurs are re­warded for the way their in­no­va­tive and orig­i­nal busi­ness ideas mesh with pub­lic needs and in­ter­ests, rather than by the way they man­age to avoid the taxes that ev­ery­one else has to pay.

What we need in a tax sys­tem is one that fairly spreads the tax bur­den across ev­ery­one who is able to pay, one that le­git­i­mately taxes those who earn the most at a higher rate.

Ei­ther that, or, if we’re go­ing to con­tinue to al­low some Cana­di­ans to spread their in­come across their en­tire fam­ily, al­low ev­ery­one to do it.

One tax sys­tem for the rich, and another for the poor is not a fair sys­tem.

The time for an even-broader review of Canada’s tax code is, frankly over­due.

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