Federal Tax Reform: A Serious CTF Proposal

[Jerry J. Fortin]

I don't get to claim driving to work nor my business suits as an expense either. So that's fair.

Businesses pay tax installments during the year (corporate or personal if running a sole proprietorship or partnership).

Not only that, but businesses must match the employees' CPP and must add $1.40 for every $1 deducted for EI and send that to the government by the 15th of each subsequent month.

If incorporated then the shareholder, who has his employee hat on, will deduct payroll deductions and send them in just as if he was a regular employee.

You also forget that there are ways to reduce the amount of withholdings from an employees' pay cheque. Fill out a TD1 form properly, make RRSP contributions under the rules that allow you to decrease your tax withholdings from your pay cheque etc....

Given that you didn't know that profitable businesses do pay installments there isn't much to say.

Since you are indeed writing responses then I must conclude that you can also read. So with that in mind how is it that you as a tax consultant would spin the difference between a withholding tax, which was what I actually said into a misconstrued and delusional opinion of my personal knowledge of installments paid quarterly? The reality is that you are simply misrepresenting what I have said and have taken some effort to spin the issue into your arrogant corner of elitist bullshit.

Employees paid by employers come under the withholding taxation system. Tax is deducted every paycheck, along with all other deductions. Oh yes, as you do say we can fill out a form and have RRSP deducted from our tax loads. What you did not mention was that our contribution levels to RRSP's are determined by a little thing called a pension adjustment amount and our own RPP payments. That little kiss for all practical purposes eliminates the deductible benefit of RRSP's, doesn't it msj?

Tell me msj, do you have a company car? Because you can, can't you? Does your company pay you bonuses, because they can, can't they? How many benefits can you realize as a business that you can't as a private citizen employee? That is what we are really discussing here msj. It is not the legality of deductions or the legitimate expenses of doing business. It is not about swinging an axe to beat business to death. It is about being treated equally under the law. The legislation that provides the operation of the creation of revenue streams for government is flawed. It is flawed in that it takes advantage of differences as justification for unequal treatment. Please do not misunderstand me msj, I seek only the equality that citizens are entitled to. This is the one case we citizens do have an entitlement, they are entitled to equal treatment under the law. For a government to create differences then exploit them is an affront to our democracy.

Income tax is simply wrong because is is unequal in its application and unfair in its implementation.

[msj]

Since you are indeed writing responses then I must conclude that you can also read. So with that in mind how is it that you as a tax consultant would spin the difference between a withholding tax, which was what I actually said into a misconstrued and delusional opinion of my personal knowledge of installments paid quarterly? The reality is that you are simply misrepresenting what I have said and have taken some effort to spin the issue into your arrogant corner of elitist bullshit.

Withholding taxes off paycheques are merely a way for the government to ensure that the employee's taxes are prepaid during the year.

For self-employed individuals the same thing is done through personal income tax installments (albeit those are quarterly).

For a corporation, in my case for example, not only does my corporation have to pay monthly corporate tax installments but it has to remit any payroll deductions for any paycheques paid to me from my corporation.

Yes, tax installments are optional but with an interest rate of 9% and the government not allowing for the deduction of this interest, it makes more sense to pay the installments on time throughout the year.

So, to sum up, employees have taxes withheld from source and sent to the government as a way of prepaying their taxes for the year.

Self-employed individuals have rules they must follow to prepay their taxes for the year.

I suppose the government is being generous to sole proprietors or unincorporated partnerships by allowing for quarterly installments.

Maybe the government does this because they recognize that the self-employed often have cash flow issues when the buy inventory or capital assets, or have to pay employees but don't get to bill the client and get paid by the client until 15+days after the end of the month.

Sure helps a little to offset this uneven playing field where businesses must expend cash on such things without getting a full deduction (inventory/capital assets) to even realize the tax savings at year end.

But accrual accounting can be cruel, as they say.

Employees paid by employers come under the withholding taxation system. Tax is deducted every paycheck, along with all other deductions. Oh yes, as you do say we can fill out a form and have RRSP deducted from our tax loads. What you did not mention was that our contribution levels to RRSP's are determined by a little thing called a pension adjustment amount and our own RPP payments. That little kiss for all practical purposes eliminates the deductible benefit of RRSP's, doesn't it msj?

For those lucky enough to have a pension adjustment of course this reduces your RRSP room. As it should.

I'm self-employed so I'm not lucky enough to have an employer pay into a pension plan for me (although I may look into an IPP but then I'm still the one paying into it, aren't I?).

Tell me msj, do you have a company car? Because you can, can't you? Does your company pay you bonuses, because they can, can't they? How many benefits can you realize as a business that you can't as a private citizen employee? That is what we are really discussing here msj. It is not the legality of deductions or the legitimate expenses of doing business. It is not about swinging an axe to beat business to death. It is about being treated equally under the law. The legislation that provides the operation of the creation of revenue streams for government is flawed. It is flawed in that it takes advantage of differences as justification for unequal treatment. Please do not misunderstand me msj, I seek only the equality that citizens are entitled to. This is the one case we citizens do have an entitlement, they are entitled to equal treatment under the law. For a government to create differences then exploit them is an affront to our democracy.

Income tax is simply wrong because is is unequal in its application and unfair in its implementation.

I don't have a company car. The partnership pays out 42 Cents per km for all employees and partners of the firm when they use their personal vehicles for business purposes.

I don't see how my company paying bonuses is of any great benefit - my corporation gets taxed on it's net income and I get taxed on whatever income I take out of the company (wage or dividend). Either way I am paying personal tax and the corporate tax.

If I were a sole proprietorship I would be paying tax on my net income every year and don't have the option of a bonus since sole proprietors don't get to deduct wages for themselves (which is why they pay income tax on their full business net income).

As for unequal treatment - it is hardly unequal for most people under most conditions.

Yes, in some areas it can be - selling shares of a qualified small business or fishing assets or farm property have such treatment which even I disagree with.

Of course, if you don't like your alleged poor treatment you do have the option to buck up and become self-employed.

I doubt you would last a year, though.

[geoffrey]

I simply can't agree with you on this point.

That's unforunate, because my point is quite accurate and clear.

The system gives special treatment to business. I can see that there are not enough people to support the concept of real change so I will just shelve the idea to a certain degree. I will undertake a small business myself and realize the benefits others get that are denied to me. Since I am in the process of starting to build a house I will make this little plan work for me.

You'll find it's not worth your time unless your legitimately involved in your business. You know you can't just get cash back from your expenses, it's deducted against revenues right?

Beyond that, your proposal to move to GST only just further moves the tax burden away from business. Which is great IMO. But counter to what your trying to accomplish.