Changing CPP

[Jerry J. Fortin]

Hmm, I thought that was the point about reducing taxes for people: to create the incentive for them to work harder, blah blah blah.

Of course, there are other rewards for being self-employed: pay is much higher, flexible hours (albeit more), get to delegate work, get to tell clients off when they really deserve to be told off, tell the same old jokes to the staff and watch them nervously laugh while knowing full well that they have already heard the joke a hundred times before, etc....

I suppose the whine can now be changed from I don't want to pay into CPP to "it's too hard to not pay into CPP."

The thing is, most of the heavy lifting has already been done for people.

Thanks to Allan Greber who successfully fought off the CRA to ensure that he and his wife could take money out of his incorporated law practice as employee profit sharing and thereby avoid CPP (amongst other benefits).

Thanks to various governments who have lowered small business tax rates (or even the dividend rate for dividends from medium/large Canadian corporations, for that matter) a person can live off of dividends to avoid CPP and not be penalized like in previous years [by penalized I mean pay higher income taxes due to very poor "tax integration" between the corporate taxes and individual taxes].

Just because this sounds to be too hard to folks like you doesn't mean it is for the rest of us who take an interest in our financial well being.

I never said that at all. You are spinning this where it does not need to go for no real purpose.

[August1991]

The thing is, most of the heavy lifting has already been done for people.

Thanks to Allan Greber who successfully fought off the CRA to ensure that he and his wife could take money out of his incorporated law practice as employee profit sharing and thereby avoid CPP (amongst other benefits).

The name is Allan Gerber and if the intent of incorporation is to avoid tax (or to avoid CPP contributions), and if I were an accountant (I'm not), I wouldn't advise a client to do this. They could face an ugly tax liability down the road.

----

Returning to the policy question of State pensions in Canada, the Quebec government's debt is about $160 billion and the Quebec's Caisse de dépôt (the equivalent of the CPPIB or the savings of State pensions in Quebec) used to be about $160 billion (now it's about $130 billion because of financial markets and bad investments).

IOW, the Quebec government has no debt. Or, in another view, the Quebec government has borrowed about $160 billion at about 2% in world bond markets and then used that money to invest in world financial markets through Caisse de dépôt. Talk about leverage!

The Quebec government could do this because it could borrow at such a low rate, 2%. Why? Because the government of Quebec has a guaranteed revenue stream through taxation of Quebecers or through equalization/federal transfers (taxation of other Canadians).

The CPPIB is no different. The federal government borrows at a low interest rate and then the CPPIB invests the money on our behalf.

The broader question is whether State bureaucrats should make decisions about investments. Can bureaucrats pick winners?

Edited June 14, 2009 by August1991

[msj]

The name is Allan Gerber and if the intent of incorporation is to avoid tax (or to avoid CPP contributions), and if I were an accountant (I'm not), I wouldn't advise a client to do this. They could face an ugly tax liability down the road.

This has to be one of the stupidest things ever written here.

Read up on the case law and on how employee share plans work before making such stupid utterances.

When/if the law changes then it changes. Until then, the CRA is SOL.

[August1991]

When/if the law changes then it changes. Until then, the CRA is SOL.

If I were a serious accountant, and I were advising a client, I would never use "the CRA is SOL" as a wise strategy.

I know that some accountants (and some lawyers) push the envelope more than others. I suppose that it depends on the client's tolerance for risk.

[msj]

If I were a serious accountant, and I were advising a client, I would never use "the CRA is SOL" as a wise strategy.

You do realize that we are on a discussion forum, right?

I know that some accountants (and some lawyers) push the envelope more than others. I suppose that it depends on the client's tolerance for risk.

Oh, so you still haven't bothered to check out the case law or the rules around EPSP's and you aren't a tax accountant or lawyer, but you are still qualified to give people advice to not follow Gerber should they find themselves in a similar situation. Right.

[madmax]

I really enjoyed all the comments and opinions in this thread. 10 points for everyone.

Seriously, its one of the reasons I like MLW.

[Jerry J. Fortin]

Saving money for your retirement is always a good idea. Enhancing pension plans can hardly be a bad idea.