Time to get rid of the NDP

[Riverwind]

The issue of dividends is something we are currently looking into as I have been told that we could each take up to $15000/year? tax free. I am not sure if this is correct as my sister in law is in Australia for the next month or so I will find out for sure when she gets back.

If you pay dividends out the company you have to pay corporate tax first (around 20% for companies with profit < $200K). When you receive dividends from a Canadian corporation you get a tax credit which reduces the personal tax you pay by about 20%. The net result is you will pay roughly exactly the same number of dollars in tax as you would if paid yourself a salary. The only difference is part of those tax dollars are paid by the company so you may think you are getting a huge break on your personal taxes with dividends.

If your company is particularily profitable (i.e. $500K in profits) then the corporate tax rate is higher. This means you would end up paying more tax than if you simply paid yourself dividends.

[Michael Hardner]

If your company is particularily profitable (i.e. $500K in profits) then the corporate tax rate is higher. This means you would end up paying more tax than if you simply paid yourself dividends.

Interesting. There must be other benefits, though, or people wouldn't incorporate so often.

[shoop]

Uhhh, there are legal liability issues. Which wouldn't necessarily go against anything that sparhawk has said.

Interesting. There must be other benefits, though, or people wouldn't incorporate so often.

[Hicksey]

Hicksey:

Basically a flat tax on new goods--not used--with necessities exempt from taxation. Everyone pays the same percentage of tax. The percentage would be the result of taking our GDP and figuring out how what percentage of the GDP that government spending turns out to be.

Read geoffrey's post. In order to replace income taxes, you'd need a huge consumption tax. And the wealthiest in Canada would see a huge tax cut.

Is that what you're talking about ?

Well the short answer is that the flat tax would be at 48% to cover current expenditures. That's on 1.077 trillion in GDP, and 518.4 billion of government spending.

What can I say? Socialist policies are expensive.

But my program replaces all. No more property taxes, no gasoline excise taxes ... no taxes except the flat tax.

[Michael Hardner]

Well the short answer is that the flat tax would be at 48% to cover current expenditures. That's on 1.077 trillion in GDP, and 518.4 billion of government spending.

What can I say? Socialist policies are expensive.

But my program replaces all. No more property taxes, no gasoline excise taxes ... no taxes except the flat tax.

By the 'flat tax', I assume you mean consumption tax.

It's an extreme and drastic experiment. It would reduce consumer spending drastically, which is what drives about 2/3 of the economy and would dry up government revenues at the same time.

Stephen Harper is pretty right-wing, fiscally, for Canada. Watch his government to see how carefully he moves on these matters, and you'll understand why these things are done as slowly as they are.

[sage]

Sparhawk, actually everything you said is fairly accurate, except for the subtle distinction on dividcend taxation. If you have a CCPC (canadian controlled private corporation) recieivng active business income, you are entitled to the Small Business Deduction (the preferential tax rate) up to $300,000 (which I believe is the latest amount, it was $200,000 and the lib's increased this).

If you pay taxes on the net income at the preferential rate and were to pull it all out through dividends, there is a slight tax advantage to receiving the dividend. This is from a tax law course a few years ago and the C.A./lawyer instructing the class had it all diagramed out and there was a slight benefit to receiving dividend income over employment income.

All of this is exclusive of the fact that you would also not be paying EI premiums.

[Michael Hardner]

Uhhh, there are legal liability issues. Which wouldn't necessarily go against anything that sparhawk has said.

Sure, but if it was completely 'even', you'd see a lot more people going the sallaried route. I think there are other tax credits that you can get as a corp. Anybody know for sure ?

[PocketRocket]

As long as people vote for the NDP, they have as much right to exist as any other federal party.

IMHO the only party which has no right to exist on a federal level is the BLOC as their ultimate mandate is the separation of Quebec, and therefore their interest in national unity and other national matters is trivial at best, and non-existant at worst.

[Riverwind]

If you have a CCPC (canadian controlled private corporation) recieivng active business income, you are entitled to the Small Business Deduction (the preferential tax rate) up to $300,000

The approx 20% tax rate I quoted included the dividend tax credit.

If you pay taxes on the net income at the preferential rate and were to pull it all out through dividends, there is a slight tax advantage to receiving the dividend.

There is a slight advantage but it is not enough to justify incorporation. Plus there are side effects because paying yourself dividends inflates your income before tax by 25% (I don't know why the gov't adds 25% and later subtracts it as a tax credit). This reduces your eligibility for GST rebates and similar income tested programs if you are in that tax bracket.

All of this is exclusive of the fact that you would also not be paying EI premiums.

You don't pay EI premiums on employment income either (owners of companies are not allowed to collect EU benefits so they don't have to pay the premiums).

[Hicksey]

Well the short answer is that the flat tax would be at 48% to cover current expenditures. That's on 1.077 trillion in GDP, and 518.4 billion of government spending.

What can I say? Socialist policies are expensive.

But my program replaces all. No more property taxes, no gasoline excise taxes ... no taxes except the flat tax.

By the 'flat tax', I assume you mean consumption tax.

It's an extreme and drastic experiment. It would reduce consumer spending drastically, which is what drives about 2/3 of the economy and would dry up government revenues at the same time.

Stephen Harper is pretty right-wing, fiscally, for Canada. Watch his government to see how carefully he moves on these matters, and you'll understand why these things are done as slowly as they are.

Not really. All it does is take all we pay to taxation and do it at the point of purchase. No taxes off our paychques, just at the register. It would certainly be a culture shock, but once people caught on things would proceed as normal.

[Riverwind]

Sure, but if it was completely 'even', you'd see a lot more people going the sallaried route. I think there are other tax credits that you can get as a corp. Anybody know for sure ?

You don't incorporate for the sake of saving taxes - the extra costs administration and accounting fees. All of the deductions you get for home based businesses are available to salaried employees if your employer gives you a letter indicating that you are required to work from home in order to earn income.

Incorporation is mostly a convenience because you can keep your business completely seperate from your personal income and it is absolutely necessary if you want to hire your own employees.

[Michael Hardner]

Thanks for the info Sparhawk.

Is there anything else in the way of major tax advantages we've left out ?

It seems to me that there are other loopholes that get you out of paying income tax...

[Michael Hardner]

Not really. All it does is take all we pay to taxation and do it at the point of purchase. No taxes off our paychques, just at the register. It would certainly be a culture shock, but once people caught on things would proceed as normal.

You don't think that that a 40-50% consumption tax would have an effect on purchases ?

You have no way of knowing what you said here. It's just a guess.

[sage]

You don't incorporate for the sake of saving taxes - the extra costs administration and accounting fees. All of the deductions you get for home based businesses are available to salaried employees if your employer gives you a letter indicating that you are required to work from home in order to earn income.

Much my business is devoted to incorporating individuals for the sole purpose of saving taxes, so I would disagree.

You don't think there's a reason the small business deduction exists, or why its limited?

[Michael Hardner]

Sage, maybe I should ask you this question:

Is there anything else in the way of major tax advantages we've left out ?

[geoffrey]

Thanks for the info Sparhawk.

Is there anything else in the way of major tax advantages we've left out ?

It seems to me that there are other loopholes that get you out of paying income tax...

The big advantage is you get move room on what you can write off as business expenses, against your income. You can also own things for the company, such as your car or what not, and you can depreciate it as needed for tax deducations (within the legal amounts of course). I don't know how much of that you could do if any at all through the person structure. Big ticket items go under the corporate banner and you'll never pay a cent of tax on them.

Of course, if you use your car mostly commuting to work or to customers, then you deserve it to be tax free and a business expense, so I don't see this as a loophole, but rather quite justified.

Depreciation of major assets is a good one. Someone with more tax experience can probably describe this better.

Don't look at it as getting out of taxes, you shouldn't have to pay tax twice on everything anyways!

You don't incorporate for the sake of saving taxes - the extra costs administration and accounting fees. All of the deductions you get for home based businesses are available to salaried employees if your employer gives you a letter indicating that you are required to work from home in order to earn income.

Much my business is devoted to incorporating individuals for the sole purpose of saving taxes, so I would disagree.

You don't think there's a reason the small business deduction exists, or why its limited?

Sage, are you a lawyer or accountant or what do you do?

You are right, there are numerous tax benifets in incorporation for small-business, especially 'independant consultants' such as myself. I don't pay nearly as much tax then if I went the sole proprietorship way, and I thank my accountant for that whole-heartedly.

[sage]

I'm a lawyer who does a fair bit of commercial work; tax planning, incorporating, buying-selling businesses, that sort of thing.

Also I don't know if you're correct Geoffrey necessarily that you get more deductions by being incorporated, that's a common misconception. The fact is you can deduct valid expenses regardless whether you are incorporated or not. It just depends on your business, and whether they are reasonable in the circumstances.

The big benefit though is, for example, you may get to make $1,000/month vehicle lease payments with money taxed at 20% (as opposed to 44%).

The tax people even have this figured out though because there are circumstances where in such a situation the provision of the vehicle itself is a taxable benefit to yourself through what's called a "standby charge".

Though we may have gotten a bit far off the bashing of the NDP. Please just let me keep a little bit of my money, that's all I want.

[tml12]

As long as people vote for the NDP, they have as much right to exist as any other federal party.

IMHO the only party which has no right to exist on a federal level is the BLOC as their ultimate mandate is the separation of Quebec, and therefore their interest in national unity and other national matters is trivial at best, and non-existant at worst.

I agree although I think the Bloc has the right to only run in Quebec if that is what they want. If the people vote, they should have as many choices as possible, this is democracy after all.

BTW: I did not vote Bloc.

[Hicksey]

As long as people vote for the NDP, they have as much right to exist as any other federal party.

IMHO the only party which has no right to exist on a federal level is the BLOC as their ultimate mandate is the separation of Quebec, and therefore their interest in national unity and other national matters is trivial at best, and non-existant at worst.

I agree although I think the Bloc has the right to only run in Quebec if that is what they want. If the people vote, they should have as many choices as possible, this is democracy after all.

BTW: I did not vote Bloc.

Gotta love how they whine about everything Quebec. Please, how many other provinces have their own political party at the federal level?

[tml12]

As long as people vote for the NDP, they have as much right to exist as any other federal party.

IMHO the only party which has no right to exist on a federal level is the BLOC as their ultimate mandate is the separation of Quebec, and therefore their interest in national unity and other national matters is trivial at best, and non-existant at worst.

I agree although I think the Bloc has the right to only run in Quebec if that is what they want. If the people vote, they should have as many choices as possible, this is democracy after all.

BTW: I did not vote Bloc.

Gotta love how they whine about everything Quebec. Please, how many other provinces have their own political party at the federal level?

As an anglophone Montrealer I am no Bloc supporter.

That being said, if they form a party and want to bitch about things they can and if people are dumb enough to vote form them thats OK too.

[Minimus Maximus]

The issue of dividends is something we are currently looking into as I have been told that we could each take up to $15000/year? tax free. I am not sure if this is correct as my sister in law is in Australia for the next month or so I will find out for sure when she gets back.

If you pay dividends out the company you have to pay corporate tax first (around 20% for companies with profit < $200K). When you receive dividends from a Canadian corporation you get a tax credit which reduces the personal tax you pay by about 20%. The net result is you will pay roughly exactly the same number of dollars in tax as you would if paid yourself a salary. The only difference is part of those tax dollars are paid by the company so you may think you are getting a huge break on your personal taxes with dividends.

If your company is particularily profitable (i.e. $500K in profits) then the corporate tax rate is higher. This means you would end up paying more tax than if you simply paid yourself dividends.

I knew there was a catch. I have a good friend who runs a portable welder here in Alberta right now and he swears he pays no tax on the dividends he and his wife recieve. I have e-mailed him a link to your response. Thanks for the info Sparhawk, I will tell my sister in law to stay in Australia and send my taxes to you!?

Strictly speaking, that's illegal. Of course, Revenue Canada would have a hard time proving you're using business resources personally, you're not supposed to do that.

Its all based on percentage usage. My point is that I had internet service long before starting my own company and payed the full price personally. Now my company pays a portion of this cost and me the person pays the remainder. Overall it costs me less for service as a portion is written off as a business expense.

[geoffrey]

As an anglophone Montrealer I am no Bloc supporter.

That being said, if they form a party and want to bitch about things they can and if people are dumb enough to vote form them thats OK too.

My problem with the Bloc is that their prime motive is somewhat treasonous (spelling??). Would any other country tolerate a party thats entire mission is to break up the country.

[BubberMiley]

I could have easily decided in high school that I would be gay because I kept getting hard on's in the shower... but I ignored that and followed the natural coarse of life, MEN BEING WITH WOMEN. Now... if being gay is not a choice, then why do 39% of gay guys turn straight, and 9% of straight guys go gay??? Because... they realize it is a sin, and its their choice to change it!!! Ever hear of "Christs gays" or something... its a church that converts gays into straights, and they actually do it.

Point proven, case closed.

I think I figured out Sam's obsession with Layton. It's the moustache.

[Hollus]

I could have easily decided in high school that I would be gay because I kept getting hard on's in the shower... but I ignored that and followed the natural coarse of life, MEN BEING WITH WOMEN. Now... if being gay is not a choice, then why do 39% of gay guys turn straight, and 9% of straight guys go gay??? Because... they realize it is a sin, and its their choice to change it!!! Ever hear of "Christs gays" or something... its a church that converts gays into straights, and they actually do it.

Point proven, case closed.

I think I figured out Sam's obsession with Layton. It's the moustache.

Definetly some repressed sexual tension there.

[BigGunner]

Who the f*** do you think you are? What possible right do you think you have advocating the BANNING of a political party? The NDP has every right to run candidates and submit a platform like every other party in Canada.

You call for getting rid of the NDP smacks of Facism.

As it is, Canada has two conservative parties. The Conservatives (who have the balls to call themselves what they are), and the Liberals (who campaign with an NDP platform, then govern from the right).

The NDP wouldn't have won 29 seats if Canadians didn't think that Layton's alternative approach wasn't worthy. They liked the fact that he and the NDP tried to work with all sides to get things done in parliament.

You might disagree with the NDP, but there are a fair number of Canadians who DO agree with them...and they have the right to send their vote to a party they agree with.

Typical...

This kind of infantile diatribe against the NDP is what I would expect from sore losers. Liberal and Conservative party hacks blame the NDP because of their own downfalls. They fail to see the weakness of their own party and blame another. THIS is why the NDP exists - so that people are not forced to choose between the red PIG and the blue PIG.