Tax: Methods of Taxation/Law

[August1991]

In France, you meet a tax inspector once a year, she/he calculates the tax you must pay, based on your current wealth/income, and gives you a bill.

In Canada, the government takes money from you at each pay cheque - and then you must calculate your tax at the end of the year. (You can thank Milton Friedman for payroll deduction.)

Property tax? They send you a bill, French style, twice a year. (Unless the bank wants its guarantee.) GST/VAT? You pay every purchase.

Dividend income? Taxable on declaration - if foreign; otherwise there's a gross-up, if domestic. Capital gain? When earned.

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I prefer a simple method of taxation and democracy: a democratic State calculates how much you must pay, and requests payment before anyone can vote on election date.

Edited April 7, 2016 by August1991

[Bryan]

A democratic society should be able to vote directly on tax measures too, Too often, the parties give really vague (if not misleading) promises at campaign time, only to blindside the electorate with something that was not what they voted for.

We had a law like that in Manitoba. Increasing the sales tax required a referendum. During the last campaign, the NDP explicitly promised not to raise the PST. They called the idea preposterous. Upon winning, and knowing that no one wanted the tax increase, they immediately changed the law so that they no longer needed permission to raise taxes. Then they increased the PST.

Stuff like that is the REASON the law was enacted. Stuff like that is why tax increases should require a direct vote on the actual bill being proposed.

[August1991]

A democratic society should be able to vote directly on tax measures too, Too often, the parties give really vague (if not misleading) promises at campaign time, only to blindside the electorate with something that was not what they voted for.

Uh, Bryan, you don't get my main point.

We should vote once a year on the same day that the government (politicians) send us a tax bill.

Moreover, to show that we live in a democracy, and we paid our taxes, we should receive a purple finger to show that we paid our taxes, and we voted.

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To me, in this 21st century world, the measure of a civilized (democratic) society is not voter participation, respect for minorities, gay rights, multiculturalism, or Left/Right ideology; it is tax compliance.

Canada is a civilised society because most Canadians largely pay their taxes. The same can be said of people in Sweden and the US.

People in f*up'ed countries don't pay taxes.

Edited April 7, 2016 by August1991

[Bryan]

I definitely disagree with you there. There's not much that is less democratic than taking people's money from them.

[bush_cheney2004]

I definitely disagree with you there. There's not much that is less democratic than taking people's money from them.

Worse yet, confiscating people's money at different rates.

[BC_chick]

In France, you meet a tax inspector once a year, she/he calculates the tax you must pay, based on your current wealth/income, and gives you a bill.In Canada, the government takes money from you at each pay cheque - and then you must calculate your tax at the end of the year. (You can thank Milton Friedman for payroll deduction.)Property tax? They send you a bill, French style, twice a year. (Unless the bank wants its guarantee.) GST/VAT? You pay every purchase.Dividend income? Taxable on declaration - if foreign; otherwise there's a gross-up, if domestic. Capital gain? When earned.=======I prefer a simple method of taxation and democracy: a democratic State calculates how much you must pay, and requests payment before anyone can vote on election date.

Payroll tax makes a lot of sense. I've seen people making $200k/year and living paycheque to paycheque. Some people (if not most) can't balance their budget, forget accruing taxes.

I don't know if you're a business owner but if you are/were, would you be willing to provide credit for your clients for 12 months before requiring payment?

Even corporations and small businesses that are profitable are required to make instalments before year-end. The government should not be in the business of providing loans.

Edited April 7, 2016 by BC_chick

[Hydraboss]

The government should not be in the business of providing loans.

Agreed.

The GoC should immediately stop any and all loans to other countries/foreign aid, quit giving small business loans through the BDoC, end financial loan programs to "new Canadian" organizations, ensure that Bombardier never gets another cent, .........

[BC_chick]

Agreed.

The GoC should immediately stop any and all loans to other countries/foreign aid, quit giving small business loans through the BDoC, end financial loan programs to "new Canadian" organizations, ensure that Bombardier never gets another cent, .........

Though I agree some are questionable most government loans are backed by assets and/or insurance and subject to interest. It's completely different than the structure of income tax where every single person earning an income basically 'qualifies' for a loan given the OP's premise and nobody pays for the cost of borrowing. Edited April 7, 2016 by BC_chick

[Bryan]

It's absurd to think of extracting people's money from them by force as those people borrowing from the govt.

[BC_chick]

What force? It's called the Income Tax Act. It's legislated just like all other social order.

Maybe you're against taxes all together, which is a whole other discussion, but if you agree with the premise of paying income tax, ensuring prompt payment only makes.

Edited April 7, 2016 by BC_chick

[Bryan]

What force? It's called the Income Tax Act. It's legislated just like all other social order.

Try just not paying your taxes, and you'll see the force applied. They aren't voluntary.

Maybe you're against taxes all together, which is a whole other discussion, but if you agree with the premise of paying income tax, ensuring prompt payment only makes.

Not at all. Some taxes are necessary. But the money is still mine until I hand it over, and it's not due until tax day. I am not taking out a loan from the government by any definition of the word if I wait until tax day to pay it.

[BC_chick]

No, the tax is not due on tax-day, that's where you're mistaken. The tax is due at source if you're on payroll and in instalments if you're a business owner.

It's the same rationale as you collecting a paycheque incrementally as opposed to one lump sum at year-end. Or the reason why a contractor does progress billing. Or some businesses take deposits.

The Income Tax states the terms of the 'contract' between you and the government and your taxes are due in the period in which you earn them. They are remitted to CRA depending on the remitting frequency of your employer, or by you in instalments if you are a profitable business owner.

[Bryan]

No, the tax is not due on tax-day, that's where you're mistaken. The tax is due at source if you're on payroll

Only if I choose to. If tell my employer not to deduct it, they will do that. I know many people who do this -- they invest the money during the year (maxing out their TFSA and RRSPs, etc.).

[BC_chick]

Only if I choose to. If tell my employer not to deduct it, they will do that. I know many people who do this -- they invest the money during the year (maxing out their TFSA and RRSPs, etc.).

If you contribute to your RRSP during the year and want your taxes reduced at source, you have to submit a copy of your contribution to CRA and they provide a letter authorizing your employer to reduce your taxable income by the amount for which you're eligible. You still pay taxes on the difference though. For example, let's say you make $60K/yr which is paid out to you semi-annually and contribute $10K to your RRSP. By the time CRA process your claim and sends the authorization to your employer, there are 10 pay periods left. You now pay tax on $1500 as opposed to $2500.

Your employer is playing with fire by not deducting enough:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/hwpyrllwrks/pnlty/pnlts/ddct-eng.html

Technically that money is not yours or your employer's. It belongs to CRA.

Edited April 8, 2016 by BC_chick

[msj]

Only if I choose to. If tell my employer not to deduct it, they will do that. I know many people who do this -- they invest the money during the year (maxing out their TFSA and RRSPs, etc.).

You mean they gamble with their money during the year (although I doubt very much that you do this and I doubt you have friends who do this).

I'm a tax accountant with a corporation to pay myself (and defer taxes with) and even I struggle with my goal of owing $2,999 of personal income tax on April 30 each year and $2,999 for corporate taxes each year on March 31 ($3,000 is the magic number to force instalments).

Why?

Because I usually earn more than I need to live on so I pay more than $3,000 in corporate taxes and, therefore, must pay instalments.

On the personal side, the time value of money is a joke, so inevitably I pay too much payroll deductions in during the year so I end up only owing a further $1,200 or so rather than the ideal $2,999.

Once again, interest rates are so small why would a regular Joe game cash flow in the way you say?

People are better off keeping it simple: stick that $1,000 per month into your RRSP and $458 per month into you TFSA and get used to that cash flow.

Before you know it, you get to do the reverse: instead of tucking away that money each month you get to live off the income (and principal).

Either way, simpler to do which means most people can and will do it.

[msj]

I will also add, as an employer of many staff I would not game the payroll deductions in the way described for any of my employees.

Why?

I'm not doing them any favours by doing this.

If anything, if one of my staff wanted me to game their payroll deductions in this way then it would indicate poor character: they are accountants FFS; if they can't budget properly with their monthly salary then they should choose a different profession.

[BC_chick]

(although I doubt very much that you do this and I doubt you have friends who do this).

That was my first thought too. I chalked it up to risky behaviour, but I have to agree, there is no way this could go on continuously without an assessment.

[August1991]

Payroll tax makes a lot of sense. I've seen people making $200k/year and living paycheque to paycheque. Some people (if not most) can't balance their budget, forget accruing taxes.

I don't know if you're a business owner but if you are/were, would you be willing to provide credit for your clients for 12 months before requiring payment?

Even corporations and small businesses that are profitable are required to make instalments before year-end. The government should not be in the business of providing loans.

BC_Chick, our relation with the State is not the same as our relation with others, in private deals.

A civilized State must ahve the power to confiscate. Your comparison is wrong.

[August1991]

What force? It's called the Income Tax Act. It's legislated just like all other social order.

Maybe you're against taxes all together, which is a whole other discussion, but if you agree with the premise of paying income tax, ensuring prompt payment only makes.

Agreed. The very definition of a civilized State is the use of power. Edited April 8, 2016 by August1991

[Bryan]

Technically that money is not yours or your employer's. It belongs to CRA.

There's nothing technical about it. It doesn't belong to them until I give it over, and I don't have to do that until the tax deadline.

Your employer is playing with fire by not deducting enough:

Many businesses literally never make any deductions for any employees. I've had a few such jobs. The onus to keep track was entirely on me.

[BC_chick]

BC_Chick, our relation with the State is not the same as our relation with others, in private deals.

A civilized State must ahve the power to confiscate. Your comparison is wrong.

The state is creating revenue. It has budgets with surpluses and deficits. Why should it conduct its affairs any differently and not protect its interest the same way any other establishment does?

That's the logic behind payroll tax.

[August1991]

No, the tax is not due on tax-day, that's where you're mistaken. The tax is due at source...

.. due at source?

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Look, BC_Chick, the source of anything that our PM has is 35 million Canadians.

My suggestion is merely that we pay our collective administrators (our PM) on the same day that we choose them. IOW, we pay all our taxes on election day. You pay, you vote. As I say, the true measure of a civilized society is not voter turn-out, it's tax compliance:

Edited April 8, 2016 by August1991

[BC_chick]

There's nothing technical about it. It doesn't belong to them until I give it over, and I don't have to do that until the tax deadline.

Many businesses literally never make any deductions for any employees. I've had a few such jobs. The onus to keep track was entirely on me.

You're wrong. It was stated quite clearly in the link I left. To give you an idea how serious they are about payroll deductions, you are actually supposed to have a separate bank account for payroll because you should not even be using CRA's money at all in your other operations (nobody does this, but it's how serious they are about making sure their money gets straight to them with no intereference).

You're obligated to withhold and you so 'in trust' for them. You're honestly playing with fire. You, as business owner are responsible for those taxes, plus interest, if your employee doesn't pay.

I had a client who wanted me to do stuff like that and there is no way. No reputable person working in finance would do such a thing.

[msj]

There's nothing technical about it. It doesn't belong to them until I give it over, and I don't have to do that until the tax deadline.

Factually wrong: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/pymnts/menu-eng.html

An employer must pay payroll deductions properly or face the consequences.

Which is not to say that employers and/or employees don't get away with gaming the system.

But why bother when the time value of money is so meanless in a low interest rate environment?

Why bother when simply making regular savings contributions is the better way to save?

Why should I, as an employer, stick my neck out for my employee in such an idiotic way?

Risk penalties because my employee can't manage cash flow and needs a payroll deduction break? Right, then it happens again next pay period, then the next etc. No favours are given by doing this so best not to do it in the first place.

Many businesses literally never make any deductions for any employees. I've had a few such jobs. The onus to keep track was entirely on me.

Yes, many businesses take advantage of people and pay them as casual labour or as contractors.

Once again, this comes down to a matter of fact: http://www.taxtips.ca/personaltax/employees/employeevscontractor.htm

Edited April 8, 2016 by msj

[Bryan]

You're wrong.

MANY businesses do not make any deductions whatsoever. It's extremely common, and it's all above board.