Liberals would lock in corporate taxes

[punked]

I presumed that when the NDP spoke of corporate taxes, that included the small business sector. Thanks for pointing that out punked.

Yah no the NDP are for restoring the 50 billion in Tax cuts put too the largest businesses in Canada, however has approved Bruce Hyer idea at a party level to phase out income tax on the small business of this nation. It is now part of the policy book being approved in council sometime in the last 6 months. They already did it in Manitoba.

[Smallc]

They already did it in Manitoba.

Not quite yet. This is the last year for small business tax in Manitoba, with a 1% rate. Manitoba has also lowered general corporate income taxes from 13% to 12%. They were to be lowered to 11%, but that is being postponed until the return of fiscal balance.

[punked]

Not quite yet. This is the last year for small business tax in Manitoba, with a 1% rate. Manitoba has also lowered general corporate income taxes from 13% to 12%. They were to be lowered to 11%, but that is being postponed until the return of fiscal balance.

Yes agreed I meant they already put this idea into action. Now they would like to do it on the federal level.

[Topaz]

I went to the source, the Liberal Party website and this is how they would treat the deficit and balance the books. http://www.liberal.ca/en/newsroom/media-releases/17809_michael-ignatieff-sets-out-fiscally-responsible-approach-to-invest-in-canadas-priorities

[punked]

I went to the source, the Liberal Party website and this is how they would treat the deficit and balance the books. http://www.liberal.ca/en/newsroom/media-releases/17809_michael-ignatieff-sets-out-fiscally-responsible-approach-to-invest-in-canadas-priorities

The start of a new red book with the Liberals making the promises the NDP have been making for years, and then never doing them. Yeah no thanks.

[msj]

As a partner in an accounting partnership where my professional corporation pays small business corporate tax rates I can certainly speak to this issue as both a tax expert and a business person.

This much I do know - Ignatieff is talking about freezing rates for medium/large businesses at 18% which is down from 35% (not small businesses which have seen their rates decreased and held steady now anyway) [note that these are only federal rates - provincial vary].

This follows a history where previous Liberal budgets, and then Conservative budgets, finally cut corporate rates.

I think talk about corporations going bankrupt from increased income taxes is a non sequitur (if not just plain stupid and or deeply ignorant, but let's be polite and call it a non sequitur).

We are talking about income taxes.

These tax profit. No profit, no income tax.

Compare this to property taxes, PST (not GST/HST which, for most businesses, they don't end up paying in the end anyway and for which many businesses in BC and ON are getting a tax break on July 1 anyway - albeit a provincial tax break), and capital taxes (thankfully, capital taxes aren't around and as bad as they once were).

As for businesses planning based on tax rates - well, yes, we do consider this, although we will consider a range because, just like our revenues and expenses cannot be fully predicted, we prefer to assume the worst and hope for the best (for example, when I budget I have been using 15% corporate tax rate for myself even though I (now) know that my corporate tax rate will be 13.5% for this year [this is federal (11%)/BC (2.5%) rate] - but who knows about the future).

I have been doing tax planning and have been assuming an increase in taxes by 5% to 10% for myself/corporation (see above 15% rate rather than 13.5%) and for any of my clients that I do tax/financial/retirement planning for.

I bluntly tell my clients that I do this not only to be conservative but because governments cannot continue to run deficits for years without consequences.

I assume tax increases but for many of my clients it wouldn't make much difference if there were no tax increases but spending cuts.

In BC, a cut to how pharmacare works could easily hit one's budget by 10% or more (this is a provincial program used for illustrative purposes only).

The fact that any party is willing to start talking about financial responsibility is a good thing and you partisan idiots who want to bury our heads in the sand and wait for the CPC or LPC to get a majority government before talking about and dealing with this reality should hang your heads in shame.

Edited March 29, 2010 by msj

[Moonbox]

Right, and being as my parents own a multi million dollar business, you are of course correct.

I'm sorry I had to laugh at this. You and I both know that doesn't make you in any way an expert.

Any business worth anything is not going to assume it's getting tax breaks that haven't happened yet. Respectfully, you have no idea what you're talking about.

Any business worth anything plans by projecting multiple scenarios. One (or many) of these could be the proposed tax decrease. While it would be stupid to make plans entirely DEPENDANT on the tax cuts, it would be equally stupid not to plan to take advantage on them.

Either way, you guys are just mincing words. Cancelling a tax cut leaves corporations with a higher tax burden they would otherwise have had. That's plain fact and however you guys want to word it makes no difference.

Edited March 29, 2010 by Moonbox

[Battletoads]

Good to see atleast one party trying to think of a way out of this conservative structural deficit

[DrGreenthumb]

Good to see atleast one party trying to think of a way out of this conservative structural deficit

The only problem I see here is that the Liberals like to run on an NDP platform and then once elected govern pretty much like the Conservatives would, minus the religious fundamentalism.

[blueblood]

Good to see atleast one party trying to think of a way out of this conservative structural deficit

While at the same time punishing those companies for succeeding by raiding their profits.

[DrGreenthumb]

While at the same time punishing those companies for succeeding by raiding their profits.

Well by continueing to cut taxes to corporations, the government necessarily must continue to shift the tax burden onto the working families, who can afford it a lot less than the corporations can. If the corporations have to pay their fair share of the tax burden I guess they will just have to cut back on the multi-million dollar bonus's for their executives. BOO-HOO! My heart bleeds for them, really.

[Alta4ever]

Well by continueing to cut taxes to corporations, the government necessarily must continue to shift the tax burden onto the working families, who can afford it a lot less than the corporations can. If the corporations have to pay their fair share of the tax burden I guess they will just have to cut back on the multi-million dollar bonus's for their executives. BOO-HOO! My heart bleeds for them, really.

Corporations don't pay taxes, they are passed on to the consumer when they buy the goods or services. So infact you are still paying the taxes.

[Smallc]

Either way, you guys are just mincing words. Cancelling a tax cut leaves corporations with a higher tax burden they would otherwise have had. That's plain fact and however you guys want to word it makes no difference.

No, you are the one mincing words. Cancelling a tax cut that hasn't yet happened isn't raising taxes.

[nicky10013]

While at the same time punishing those companies for succeeding by raiding their profits.

You can't raid what wasn't there.

[capricorn]

If the corporations have to pay their fair share of the tax burden I guess they will just have to cut back on the multi-million dollar bonus's for their executives. BOO-HOO! My heart bleeds for them, really.

I'm not a fan of fat bonuses to executives. But looked at it another way, wouldn't a lower corporate tax rate enable paying lower rung employees higher rates of pay?

[DrGreenthumb]

I'm not a fan of fat bonuses to executives. But looked at it another way, wouldn't a lower corporate tax rate enable paying lower rung employees higher rates of pay?

It might "enable" all kinds of things, it doesn't mean they will happen. Corporations that can already afford multi-million dollar executive bonus's can already well afford to pay lower rung employees more. They won't though because more for the workers means less for the executive yacht club.

[nicky10013]

I'm not a fan of fat bonuses to executives. But looked at it another way, wouldn't a lower corporate tax rate enable paying lower rung employees higher rates of pay?

Theoretically. It's a good question to ask. Not to say that you aren't right but I'd honestly like to see a statistic (not asking for it, I'd just like to see the study done) to see if there's a correlation between wages and lower corporate tax rates or whether that extra revenue is reinvested in another avenue.

[msj]

Either way, you guys are just mincing words. Cancelling a tax cut leaves corporations with a higher tax burden they would otherwise have had. That's plain fact and however you guys want to word it makes no difference.

I'm curious on how you viewed it when the Liberals cut the lowest personal income tax rate to 15% back in 2005 (in November 2005 retroactive to January 1) and then the CPC introduced a budget in 2006 that increased the rate back up to 15.5% effective July 1, 2006 (so a 15.25% tax rate for 2006) before finally being shamed into leaving it at 15% in 2007 and future years?

Did you see this as a tax hike?

I remember many people on this board arguing that the CPC cut income taxes.

Now, that was blending, mixing, and mincing words to new and obnoxious levels.

As for this - sure, consider it a tax hike if you want.

For us small businesses we have been merrily stuck with an 11% federal rate for 3 or so years now (I'm not complaining).

For medium/large businesses, well, they have had their federal income taxes cut to 18% from 35% in the past 7 years and many have seen the elimination of capital taxes too, so, really, boo hoo hoo.

[Jerry J. Fortin]

Corporations don't pay taxes, they are passed on to the consumer when they buy the goods or services. So infact you are still paying the taxes.

Well said, its speaks toward the real truth that is very well hidden. In the end it is the consumer covering all costs associated with production including taxes and profits. Yet there is real benefit at this point in time of freezing any level of taxation to any specific segment of the society of which we are all a part of. Logic dictates that the disparity created will eventually become contentious and result in an across the board reduction.

In my view that disparity exists in the difference between corporate and personal taxation. Personal taxes do not take into account expenses in the same manner applied to corporate taxation. Therefore net taxable income is evaluated in a different manner. There are costs experienced by citizens in the production process that should be tax deductible. Strangely they are not. These costs may be related to transportation or clothing, or even food. They could even be applied to housing and entertainment as well as in the area of insurance.

A true dialogue on taxes is sure to follow this tactical political move on the part of the Liberals, and we may all benefit from that.

[msj]

Well said, its speaks toward the real truth that is very well hidden. In the end it is the consumer covering all costs associated with production including taxes and profits.

Yeah, because businesses can charge whatever they want so we shouldn't tax them at all.

In my view that disparity exists in the difference between corporate and personal taxation. Personal taxes do not take into account expenses in the same manner applied to corporate taxation.

That's because when I pay an expense I am only paying it in order to earn income - hence it is deductible.

When I buy myself a new suit, just like you, I don't get to deduct that expense because that is a personal expense.

Trust me - I only spend as much money as is necessary in order to earn money because, unlike you, I understand that when I'm expensing $100 for business purposes, I'm still out of pocket $86.50.

Sure, some people do slide personal expenses onto their tax returns when they shouldn't. But then, some people get cash tips, get away with capital gains on personal property etc... and never get caught.

Therefore net taxable income is evaluated in a different manner. There are costs experienced by citizens in the production process that should be tax deductible. Strangely they are not. These costs may be related to transportation or clothing, or even food. They could even be applied to housing and entertainment as well as in the area of insurance.

When I drive to and from the office, buy a suit, go out for lunch without a client (i.e personal lunch), pay for life insurance, etc... I don't get to deduct that either.

When I do go out to lunch with a client I only get to deduct 50% of it anyway so that $100 business lunch is costing me, after tax savings, $93.25.

Arguably, $50 of that is personal since that's my portion and I've got to eat anyway.

But, clearly, one can see that, effectively, I'm not getting a tax benefit from my portion anyway - only the client portion is being written off and that's where my tax savings stem from (i.e. 13.5% on $50 = $6.75 in tax savings).

Edited March 29, 2010 by msj

[blueblood]

You can't raid what wasn't there.

I am in the borderline small-medium business tax bracket depending on what year I have. That cut that Harper was planning on implementing was going to help me significantly if I had a good year and made too much money.

30% is better than 27%

MB corporate income tax got whittled down to 11% (fed+prov.) for small business, yay!!

That looks like an incentive to buy iron if I ever saw one.

Anyhoo, the tax freeze isn't good for shareholders, those being a large portion of the population of the country because that dividend cheque is going to be smaller...

[capricorn]

A true dialogue on taxes is sure to follow this tactical political move on the part of the Liberals, and we may all benefit from that.

A dialogue would certainly be productive. By all reports, canning the planned tax cut was sprung at the tail end of the thinkfest. I'm surprised the Liberals didn't at least notify the business community leaders of this proposed policy. Were these business reps not included in a thinkfest dialogue on the economy that would directly affect their community?

The head of the country’s largest business group said Monday he was “blindsided” and “deeply concerned” about a policy push by the Liberal Party to forgo planned cuts to corporate tax rates.

“The net impact would be to discourage investment, discourage competitiveness, and discourage job creation,” Perrin Beatty, president of the Canadian Chamber of Commerce, told the Financial Post.

---

Policy analysts were also critical of Mr. Ignatieff’s latest move.

“This strikes me as unwise,” said Finn Poschmann, vice-president of research at C.D. Howe Institute.

The plan to lower corporate tax rates to 15% would “significantly” change Canada’s standing in the global marketplace. “We will be viewed as a low-tax jurisdiction and a healthy place to invest in plants and people, and build jobs and incomes – and that why you do it.”

http://www.montrealgazette.com/business/fp/blasts+Liberals+corporate+plan/2739245/story.html

But TD Bank chief economist Don Drummond said Monday there is almost universal agreement among experts that the most destructive taxes are those on corporations and the least are sales taxes.

---

Canadian Chamber of Commerce president Perrin Beatty said the federal Liberals sprang the proposal without consulting with the business community beforehand.

“It was a surprise and an unpleasant one,” he said. ““We will be following up with them to express our deep concern about this.“

It is furthermore unclear whether Ottawa would gain as much as the Liberals believe, added Toronto-area economic consultant Dale Orr.

Orr said scrapping the cuts would cost Ottawa revenues in reduced investment and in the loss of a competitive advantage that would have resulted in more multinationals paying their taxes in Canada.

Orr says it’s difficult to calculate how much that would impact revenues, but he says the Liberals won’t realize the full $5 billion or $6 billion they expect.

http://www.torontosun.com/money/2010/03/29/13395616.html

[Jerry J. Fortin]

So the great thinkers believe that a sales tax is less problematic than an income tax! Finally a voice of reason can be heard, but who is listening?

[blueblood]

So the great thinkers believe that a sales tax is less problematic than an income tax! Finally a voice of reason can be heard, but who is listening?

It's less problematic if you like to stash it in the bank and not spend it.

[punked]

It's less problematic if you like to stash it in the bank and not spend it.

It is a great tax to get those poor people to pay taxes, I mean they have buy food and milk for their kids so we will get their tax money that way. Who cares if they have less of it to spend on milk just means they go a little hungry. Isn't that what Canada is about?