Quote:
Originally Posted by MarchHare
With respect to what you call "loopholes", in many cases these are tax credits that the government authorized to provide an incentive for a particular behaviour. We have many of these in Canada, too. For example, the government thinks it would be a good idea if post-secondary education was more affordable to a greater number of Canadians (a higher educated work force will, at least in theory, lead to a stronger economy), so you can claim tuition fees as a tax credit. Likewise, promoting retirement savings was seen as a good thing, so you can also subtract RRSP contributions from your taxable income (the money will eventually be taxed when you withdraw it during your retirement, but the idea is that you'll be at a lower marginal rate at that time). More recently, we had the Home Renovation Tax Credit to help the economy during the last recession.
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I think the "loopholes" that people are talking about involve means that people use to evade the intent of the law. In that respect, I don't think an RRSP / IRA is really a loophole: the purpose is explicit.
I think the more relevant provisions are strategies like "transfer pricing" that are used by companies purely to hide revenue from US authorities.
One of my favorites was the tax exemption about 10 years ago that said vehicles over a certain weight qualified as farm equipment and their purchase provided advantageous tax treatment. The net result: Hummer's also qualified due to their weight, and normal people were buying them and using a significant portion of the purchase price as a tax write-off. Sheer silliness.