FAIR TAX

[msj]

Huh? I've done plenty of GST quarterly returns, and not on a single one have I ever sent in the receipts. The Feds know nothing about the purchaser of goods. It's not like there's some big data bank. The GST number isn't used to track anything.

The GST # is very important.

There are companies that have "paid" GST to other companies that did not have proper GST #'s (yes, it was fraud being committed by the recipient).

The payee claimed the input tax credit (ITC) and, upon discovery of the improper GST # by the CRA, was unable to claim the ITC.

Which is why this was set up.

I was involved in the construction of a building and it is amazing how many subcontractors think that they can get away with not giving you their GST #'s. Of course, they didn't get paid until we got a clearance certificate on their GST # (and WCB and a stat. dec.).

It was nice holding onto hundreds of thousands of dollars until they got their stuff together.

As for not sending in receipts - no the government will either come to you to check things out if it's an audit or, more likely, ask for a print out of your GST ITC G/L and then will select 5 or so transactions and ask you to fax them the receipts to support the amount.

[August1991]

The GST # is very important.

There are companies that have "paid" GST to other companies that did not have proper GST #'s (yes, it was fraud being committed by the recipient).

The payee claimed the input tax credit (ITC) and, upon discovery of the improper GST # by the CRA, was unable to claim the ITC.

The potential for fraud is greatest in exports of Canadian made goods/services. An exporter can claim the full GST refund, without ever having collected the tax.

And the foreigner's invoice contains no GST number.

Link

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In terms of potential scams, the GST offers fewer possibilities than an income tax and so I prefer it to the income tax. On efficiency grounds, the GST corrects the distortion between saving and consumption. (An income tax with the RRSP/TFSA achieves the same.)

The GST loses in terms of fairness. High income/spenders pay the same rate as poor people. This is partly corrected by exempting rental payments, food from GST - and giving quarterly GST refunds. (But that's bureaucratic.)

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Since this thread is entitled "FAIR TAX", I'm surprised no one has noted the TFSA.

Tax Free Savings Accounts amount to huge tax cuts, far larger than the so-called Bush tax cuts. In the long run, these accounts will have a tremendous effect on government and individuals.

With RRSPs and TFSAs, we in effect have almost the equivalent of the Fair Tax of the OP - minus the ease of collection of a GST/HST/VAT.

Edited September 28, 2010 by August1991

[RNG]

I have been a privately controlled Canadian corporation (PCCC) for about 22 years now. So I have been a GST registrant since it started. They have never audited me, although I must admit that I have been totally honest and haven't pushed the envelope at all. But fraud is easy to achieve, based on my aquaintences. Irrespective, an overriding GST type tax instead of all the others is the best alternative. Especially if you apply the Fair Tax based pre-bate.

[RNG]

The potential for fraud is greatest in exports of Canadian made goods/services. An exporter can claim the full GST refund, without ever having collected the tax.

And the foreigner's invoice contains no GST number.

Link

----

In terms of potential scams, the GST offers fewer possibilities than an income tax and so I prefer it to the income tax. On efficiency grounds, the GST corrects the distortion between saving and consumption. (An income tax with the RRSP/TFSA achieves the same.)

The GST loses in terms of fairness. High income/spenders pay the same rate as poor people. This is partly corrected by exempting rental payments, food from GST - and giving quarterly GST refunds. (But that's bureaucratic.)

----

Since this thread is entitled "FAIR TAX", I'm surprised no one has noted the TFSA.

Tax Free Savings Accounts amount to huge tax cuts, far larger than the so-called Bush tax cuts. In the long run, these accounts will have a tremendous effect on government and individuals.

With RRSPs and TFSAs, we in effect have almost the equivalent of the Fair Tax of the OP - minus the ease of collection of a GST/HST/VAT.

The limit on the TFSA is so low as to be a joke. How much could you save if you maxed it out?

[August1991]

The limit on the TFSA is so low as to be a joke. How much could you save if you maxed it out?

TFSA limit of 5000? You may think that the tax saved is low now but then you don't understand compound interest.

Harper/Flaherty have offered huge tax cuts to people in the future - and they did the right thing. They leveled the playing field for choosing between spending today, and spending in ten years. Now, people have the right incentive to save - or spend.

Edited September 28, 2010 by August1991

[Smallc]

The limit on the TFSA is so low as to be a joke. How much could you save if you maxed it out?

Well, that shouldn't be your only savings vehicle. In combination with RRSPs, pension plans, and a whole host of other things, it's simply another tool.

[msj]

I saw this post thanks to RNG. Perhaps I need to put RNG on ignore too but regardless I will make an exception and respond.

The potential for fraud is greatest in exports of Canadian made goods/services. An exporter can claim the full GST refund, without ever having collected the tax.

And the foreigner's invoice contains no GST number.

Link

This is why the CRA have directed more resources to audit these types of businesses.

In terms of potential scams, the GST offers fewer possibilities than an income tax and so I prefer it to the income tax. On efficiency grounds, the GST corrects the distortion between saving and consumption. (An income tax with the RRSP/TFSA achieves the same.)

And income tax still raises much more in revenue than GST/HST. And income tax is more politically acceptable.

The GST loses in terms of fairness. High income/spenders pay the same rate as poor people. This is partly corrected by exempting rental payments, food from GST - and giving quarterly GST refunds. (But that's bureaucratic.)

Fairness - that's why GST is less acceptable than progressive income taxes.

Because few of us make enough money to actually pay taxes at the highest marginal tax rates on a regular basis we can't vote ourselves flat taxes. Then there are those of us who do pay high marginal tax rates who don't mind paying them because we buy into that whole vertical equity thing.

As for the quarterly GST refunds - well, those aren't possible with our income tax system.

Since this thread is entitled "FAIR TAX", I'm surprised no one has noted the TFSA.

Tax Free Savings Accounts amount to huge tax cuts, far larger than the so-called Bush tax cuts. In the long run, these accounts will have a tremendous effect on government and individuals.

With RRSPs and TFSAs, we in effect have almost the equivalent of the Fair Tax of the OP - minus the ease of collection of a GST/HST/VAT.

I agree with this (not enought to take you off ignore though ). Canada's tax system works reasonably well which is why Canada isn't like Greece as I have already linked to above.

Overall, we have a good mix of progressive and regressive taxes that complement each other quite well.

Unfortunately, there are too many people who don't appreciate just how good we have it and who want to lower their taxes so they make up sh!t and call it "FAIR TAX."

[msj]

Well, that shouldn't be your only savings vehicle. In combination with RRSPs, pension plans, and a whole host of other things, it's simply another tool.

What does it matter.

Most Canadians don't save anyway - 60% live pay cheque to pay cheque.

We like forced savings plans like "building equity" in houses by using 95% leverage and 35 year amortization periods, but, at least the capital gain is tax free (if it's your principal residence).

[RNG]

Am I the only one who doesn't know what msj is going on about?

[Smallc]

What does it matter.

Most Canadians don't save anyway - 60% live pay cheque to pay cheque.

Well, I do. If I don't have hundreds of dollars left over every month, I feel like I'm doing something wrong. Right now, I save just a but (a couple hundred dollars a month) and I used the rest to pay off my school debt...as quickly as possible. I've had to carry a VISA balance twice this year (I hate that), but it'll soon be gone. Still, It's hard to go from a job making 50K a year to working a couple jobs to make 20K....oh well, the job market is improving, and soon that (hopefully) won't be a problem.

[msj]

Am I the only one who doesn't know what msj is going on about?

Probably not.

That's why it's funny you would start a thread about taxes when you don't know much about our system in the first place.

[RNG]

Probably not.

That's why it's funny you would start a thread about taxes when you don't know much about our system in the first place.

I've been paying Canadian taxes since 1962. Don't tell me I don't know taxes. The mis-named Fair Tax is wonderful. On top of everything else it prevents the freaking politicians from being able to finagle help for their buddies and give breaks for Quebec. Why do you love the corruption of the establishment?

[Bonam]

Shrug, it can work. For example, Washington state, where I live, has only a sales tax, no income tax. To the south, Oregon has only an income tax, no sales tax (the federal government still collects its own income tax in both cases).

That being said, I don't see any particularly compelling reason to shift the taxes in this way. Personally, I'd rather that taxes (and spending) just be cut.

[bloodyminded]

I saw this post thanks to RNG. Perhaps I need to put RNG on ignore too but regardless I will make an exception and respond.

Why would you put RNG on "ignore"? He seems a decent, civil debater.

[Pliny]

The income tax is one of the worst forms of taxation especially our graduated system with write offs and loopholes.

The graduated income tax system is unfair. A flat income tax would be fairer and more just. Having our government treat each individual equally regardless of race, gender, religion, or income would be a step in the right direction. A flat income tax would still have the rich paying more. Ten percent of 20,000 is 2,000 and ten percent of 200,000 is 20,000. Is 20,000 not more than 2,000? "From each according to their ability" is a Marxist concept and patently unfair.

A consumption tax is even better than an income tax. A person may earn 50,000 in the first six months of a fiscal year and then be broke by the end of the year. His circumstances may have been that some catastrophic event financially wiped him out but he still has his tax bill which compounds his troubles - and tax collectors are not understanding. Experiencing a financial setback under a consumption tax only means that he has to cut his spending and is not further burdened by playing catch up on a huge tax bill.

Really, the problem is not taxes but that taxes are too high and too numerous. Few will complain about a little tax.

The government likes, not just a stable income stream but an ever-expanding income stream - they are, after all, continually inflating the money supply. One of the reasons they panic in a period of deflation is it interrupts their ever-expanding income stream. People aren't spending or hiring and the economy is not expanding. They need to keep inflation going but don't want inflation that devalues their currency too much.

Government needs to control it's spending as much, if not more, than it controls it's revenues. It's a short hop to becoming Greece if it doesn't.

[Michael Hardner]

The graduated income tax system is unfair. A flat income tax would be fairer and more just. Having our government treat each individual equally regardless of race, gender, religion, or income would be a step in the right direction. A flat income tax would still have the rich paying more. Ten percent of 20,000 is 2,000 and ten percent of 200,000 is 20,000. Is 20,000 not more than 2,000? "From each according to their ability" is a Marxist concept and patently unfair.

Marxist = unfair, or just the word 'unfair' itself is an objective view.

I say set the system up for what works best. The graduated system, with steps at various income levels works best. In the end, we're talking about reduction for the highest earners here so let's talk about what needs to be funded, and what results in the best system - bottom line.

[Alta4ever]

Marxist = unfair, or just the word 'unfair' itself is an objective view.

I say set the system up for what works best. The graduated system, with steps at various income levels works best. In the end, we're talking about reduction for the highest earners here so let's talk about what needs to be funded, and what results in the best system - bottom line.

The flat tax seems to work very well here.

[Michael Hardner]

The flat tax seems to work very well here.

Point taken. This link: http://www.ffwdweekly.com/article/news-views/news/alvertas-flat-tax-a-disadvantage-think-tank-5217/ says they could wipe out the deficit by eliminating the flax tax. Apparently Alberta is spending money it doesn't have now.

[bloodyminded]

A flat income tax would still have the rich paying more. Ten percent of 20,000 is 2,000 and ten percent of 200,000 is 20,000. Is 20,000 not more than 2,000?

Under this scenario, 2 000 is more difficult, is a more profound and pronounced hardship, than is the 20 000. The effect is of paying higher taxes, even though you technically aren't.

And the loopholes for the wealthy will absolutely continue, as new methods are dreamed up by the only citizens who actually matter: the owning and investment class. That's a guarantee.

[msj]

Why would you put RNG on "ignore"? He seems a decent, civil debater.

Sorry, I wasn't clear enough there.

I have put August1991 on ignore for various reasons.

I happened to read RNG's reply to August and then felt compelled to respond to August.

If I put RNG on ignore then I would not have seen his response to August and, therefore, would not have seen August's post at all and would not have responded.

That's all meant in jest - RNG seems like a decent person so I have no intention of putting him on ignore.

It just means that when I happen upon a post where I am ignoring someone, then I really should ignore the post that is being quoted and move along.

[msj]

I've been paying Canadian taxes since 1962. Don't tell me I don't know taxes. The mis-named Fair Tax is wonderful. On top of everything else it prevents the freaking politicians from being able to finagle help for their buddies and give breaks for Quebec.

Just because you pay tax doesn't mean you have an understanding of how the system works, why it works the way it does (screw ups and all) etc....

Until this "Fair Tax" movements considers things like vertical equity, horizontal equity, adequate revenue for the government, tax neutrality, tax simplicity, etc...

Since too many of those principles are ignored by any "fair tax" movement I don't really take their argument seriously.

After all, why argue over a proposed consumption tax of 27% when we know that in Canada it would have to be higher (probably closer to 40%) and, politically, Canadians already hate paying 5% GST or 12/13/15% HST?

Why do you love the corruption of the establishment?

Ahh, a loaded question. Why not ask me when I will stop beating my wife?

[ToadBrother]

The graduated income tax system is unfair. A flat income tax would be fairer and more just. Having our government treat each individual equally regardless of race, gender, religion, or income would be a step in the right direction. A flat income tax would still have the rich paying more. Ten percent of 20,000 is 2,000 and ten percent of 200,000 is 20,000. Is 20,000 not more than 2,000? "From each according to their ability" is a Marxist concept and patently unfair.

That would be fair if the basic standard of living was flat, but it isn't. Taking $2,000 dollars from a guy who earns $20,000 will have a far more significant impact on their capacity to pay for the basic necessities than $20,000 from a guy who makes $200,000.

This is the classic Libertarian conundrum in all its forms. What you have reiterated, from the taxation angle, is basically that the low-wage earner has the right to starve to death. Take 10% from a low income family, and what you've done is anything but fair. You've probably guaranteed a below poverty line existence. In fact, I'd suggest that what you would do is basically swell the welfare lines, because people would make more money by being on the dole than on a paycheck. If you deny them welfare, then you're dooming an underclass to working starvation.

Yeah, that's fair.

Edited September 28, 2010 by ToadBrother

[msj]

You realize you just supported the misnamed Fair Tax, don't you?

You have completely misread my post.

The reason Canada's system works so well is because it has a diversified tax base.

If you get away with not paying your full share of income tax then you are paying some tax thanks to GST/HST.

If you don't pay your full share of GST/HST then you are likely paying some income tax.

The government then has programs running from the filing of income tax returns and GST/HST returns and other required filings that allows them to co-ordinate audits to then nail people who are cheating the system.

No, it's not perfect but it does work quite well.

I have seen contractors who used to get away with lots of tax evasion who have had to mortgage their house because they have been nailed for tens of thousands of dollar.(1) I certainly didn't shed any tears (although I did reduce the amount payable by several thousand dollars).

Under the "Fair Tax" they would never be nailed at all.

They would work under the table, not charge the "fair tax" and, since there is no income tax system under this "fair" system, it would never be found out by other means.

Canada would end up like Greece - an ineffective tax system.

Edited:

1) The audits are usually triggered thanks to the T5018 filing system. This is where a contractor who pays other contractors has to report to the government who and how much has been paid (and generally this is done with the GST # being the identifier). The government then takes this information and uses it to determine who is worth auditing.

IOW, as one contractor is deducting an expense he has to report what is revenue for another contractor.

No, this does not deal with those contractors doing under the table jobs for regular people but it has led to hundreds of millions of dollars for the government as they audit contractors for income tax and GST. Not to mention the millions that come in now as contractors realize they have to be more honest (or more careful) and file accordingly.

Of course, if you are hiring a contractor to do a big job and you want to do it under the table - well, if the job isn't done right then you don't have much recourse. So if you get ripped off - well, boo hoo hoo for you - that's the price that's paid for dishonesty.

Edited September 28, 2010 by msj

[RNG]

You have completely misread my post.

The reason Canada's system works so well is because it has a diversified tax base.

If you get away with not paying your full share of income tax then you are paying some tax thanks to GST/HST.

If you don't pay your full share of GST/HST then you are likely paying some income tax.

The government then has programs running from the filing of income tax returns and GST/HST returns and other required filings that allows them to co-ordinate audits to then nail people who are cheating the system.

No, it's not perfect but it does work quite well.

I have seen contractors who used to get away with lots of tax evasion who have had to mortgage their house because they have been nailed for tens of thousands of dollar. I certainly didn't shed any tears (although I did reduce the amount payable by several thousand dollars).

Under the "Fair Tax" they would never be nailed at all.

They would work under the table, not charge the "fair tax" and, since there is no income tax system under this "fair" system, it would never be found out by other means.

Canada would end up like Greece - an ineffective tax system.

I strongly disagree with much of this post but am busy with family duties. I will come back to it.

[bloodyminded]

Sorry, I wasn't clear enough there.

I have put August1991 on ignore for various reasons.

I happened to read RNG's reply to August and then felt compelled to respond to August.

If I put RNG on ignore then I would not have seen his response to August and, therefore, would not have seen August's post at all and would not have responded.

That's all meant in jest - RNG seems like a decent person so I have no intention of putting him on ignore.

It just means that when I happen upon a post where I am ignoring someone, then I really should ignore the post that is being quoted and move along.

Ok, I gotcha. Sometimes I don't follow trains of basic logic too well.