Are Your Taxes Fair?

We ask Toby Sanger, ex­ec­u­tive di­rec­tor of Cana­di­ans for Tax Fair­ness

Reader's Digest (Canada) - - Front Page - BY Bryan Borzykowsk­i

Are av­er­age Cana­di­ans get­ting a raw deal on taxes?

Yeah, and it’s got­ten worse over time. There are so many loop­holes, and they’re par­tic­u­larly ben­e­fi­cial for top in­come earn­ers.

What kind of loop­holes are we talk­ing about here?

It could be putting money into a pri­vate fam­ily trust or into a cor­po­ra­tion, which has a lower tax rate than in­di­vid­u­als pay. It could then be ex­pens­ing things through that cor­po­ra­tion, like en­ter­tain­ment. Cor­po­ra­tions can write off some of the cost of a pri­vate box at a hockey game, for in­stance, so the gov­ern­ment is ba­si­cally sub­si­diz­ing that.

I’ve read that $3 bil­lion in taxes are evaded ev­ery year be­cause prof­its are put into off­shore ac­counts—legally. Why is this al­lowed to hap­pen?

Fi­nanciers from the United King­dom, United States and Canada cre­ated tax havens at dif­fer­ent times—be­tween the 1920s and the 1960s. RBC and Sco­tia­bank were par­tic­u­larly ac­tive in the Caribbean. Their peo­ple, in­clud­ing for­mer Cana­dian fi­nance min­is­ter Don­ald Flem­ing, were in­stru­men­tal in mak­ing th­ese coun­tries into tax havens, where Cana­dian laws—in terms of tax­a­tion, trans­parency and other reg­u­la­tions— don’t ap­ply. It’s only the very wealthy and mega­cor­po­ra­tions who have ac­cess to tax pro­fes­sion­als and lawyers who take ad­van­tage of this.

How does the Canada Rev­enue Agency (CRA) choose whom to au­dit?

Right now, com­puter pro­grams de­cide for the most part, us­ing more than 200 vari­ables, like where some­one lives and if there are any pat­terns in be­hav­iour that could be a sign of tax eva­sion. For in­stance, one thing CRA of­fi­cials have men­tioned to me is that they’re look­ing at where peo­ple live and the value of their homes in or­der to match that up against their de­clared in­comes. In some ways it’s worked, but peo­ple can be un­fairly tar­geted. The CRA’s bud­get has also been slashed, which means they don’t have as many re­sources to go after wealthy in­di­vid­u­als and large cor­po­ra­tions.

Does the gov­ern­ment just not care about “the lit­tle guy”?

It de­pends on the party in power or who in the CRA is deal­ing with your case. Some case­work­ers are ag­gres­sive, and some are sym­pa­thetic. But there’s a sense that the CRA is go­ing after the smaller fish. Why? Be­cause they’re more eas­ily in­tim­i­dated, or they don’t have tax




lawyers. In fact, last year our or­ga­ni­za­tion got a call from the CRA. Ac­cord­ing to their cal­cu­la­tions, we owed $5.10 in GST be­cause we had $34.70 in sales for the year. I had to re­mind them that a non-profit only pays GST if it earns over $50,000 in a year. It was funny, but it was also a lit­tle taste of what some in­di­vid­u­als and small busi­nesses are up against.

Are av­er­age Cana­di­ans miss­ing out on any tax breaks?

Yes, there are some. Peo­ple may be able to claim the cost of union and pro­fes­sional dues, and there’s also a large range of med­i­cal ex­penses that are el­i­gi­ble to be de­ducted, in­clud­ing den­tal ser­vices, travel for med­i­cal rea­sons and fees for nurs­ing homes. It’s hard for peo­ple to re­mem­ber all that.

One way to be­come in­formed is to visit a com­mu­nity or­ga­ni­za­tion that pro­vides vol­un­teer tax clin­ics. Tax­ also pro­vides good in­for­ma­tion.

What’s one thing you would im­prove about Canada’s tax sys­tem if you were in charge?

I would make it more like Nor­way’s, for ex­am­ple. The Nor­we­gian Tax Ad­min­is­tra­tion pre­pares peo­ple’s tax re­turns and then sends them to their cit­i­zens to see if they want to make changes. It can take Cana­di­ans up to eight hours to pre­pare or file their taxes, and they may miss de­duc­tions they’re en­ti­tled to. The gov­ern­ment has a lot of the in­for­ma­tion on file al­ready that would help them do it faster and bet­ter.

Cana­di­ans are a fair-minded peo­ple. They’re happy to pay for pub­lic ser­vices, but if they see the sys­tem as un­fair, they’ll be less in­clined to con­trib­ute their share of taxes, and the whole sys­tem falls apart.

Cana­di­ans for Tax Fair­ness is a non­profit or­ga­ni­za­tion that ad­vo­cates for fair and pro­gres­sive tax poli­cies.

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