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Originally Posted by Mathgod
Thank you for the reasonable rebuttal. Cheers!
Putting more time, resources, & effort into going after the underground economy is a great idea. 100% agree there.
I would suggest though that while the CRA has mechanisms for going after foreign money, there's a lot of tax dodging that still slips between the cracks. An estimated $20-$24 billion is lost each year due to tax non compliance. https://canadianlabour.ca/canada-sho...e-to-good-use/
https://www.canada.ca/en/revenue-age...-overview.html
I also sincerely believe that the wealthy are given too much leeway in terms of appeals, negotiating power, etc. When it comes to taxes on offshore money, it should be that the CRA determines how much you pay, and you pay it end of story. No beating around the bush with appeal processes that take years and make it not worth it for the CRA to keep pursuing many of these cases. While due process is an important thing, and our intuitions tell us that everyone should be guaranteed it, we have to call a spade a spade here and realize that the wealthy tend to abuse these processes and end up paying less than they ultimately should, because they make it too expensive & cumbersome for the CRA to pursue their cases.
The other issue is tax avoidance techniques, which are technically legal but allow a person to bring down their effective tax rate. These techniques are related to already accumulated wealth, not income, and as such are overwhelmingly used by multimillionaires & billionaires, not everyday people. The videos in the OP talk about those.
Canada does not have an estate tax, and IMO badly needs one. And in case anyone's wondering, I personally stand to lose if such a tax is implemented. That's right, I'm advocating for a policy that will have a negative impact on me personally if implemented. GASP!  How can such a thing be possible??? The answer is I happen to give a damn about others, that's how.
Some point out that when a person dies, the person's assets are considered sold at that point, and 50% of the capital gains on the asset are considered income for that tax year. Some would argue that this amounts to an estate tax. I disagree. Capital gains tax and estate tax are two different things. An estate tax looks specifically at the value of the assets being inherited, where CGT looks at the amount of appreciation in the value of the asset over time.
People bring up the issue of double taxation. I'd argue it's not an issue at all. Whether you're taxed x amount twice, or 2x amount once, the end result is the same amount of tax paid. It's the same thing. A government should put in any tax system that it needs to in order to raise the revenue it needs to provide services, programs, infrastructure, etc. Any combination of taxation policies is justified, as long as the overall system is feasible and doesn't place an unreasonable burden on anyone.
So yes, time for an estate tax. For all the talk coming from conservatives about bootstraps/hard work/self determination, it does come across as ironic when they want to carve out a nice neat little exemption to those principles for those who happen to have won the birth lottery and lucked their way into being born into a family that has significant wealth.
Raising the GST to curb consumption is probably a good idea too. |
You need to go a bit more in depth in understanding before quoting certain things to avoid taking certain things out of context. The bolded points are really off or worded very badly context wise.
Your $20-24 billion lost number is not purely foreign tax dodging as you implied. It's total tax gaps
before audits. Audits reduce the tax gap between 30-75% depending on the category. There's even a nice little picture chart on the link you put up. Foreign taxes are around $0.8-3 billion. BUT, most of these numbers are pre-Audit numbers for which the article mentions that they recover around %. Furthermore, the article discusses "what is tax gap"? Not all of it is tax dodging as you implied, but it includes things like bankruptcy, honest mistakes not filing on time or at all and finally, "deliberate choices". IMO only the last two are actual tax dodging and I wouldn't say the first two aren't insignificant. The first two I'd assume are pretty close to half (+/- a little bit).
Tax minimizing/tax efficiency is NOT tax avoidance. Please learn the appropriate terminology if you want more reasonable rebuttals. Tax avoidance is known as GAAR. Tax minimization is not tax loopholes either. As I mentioned Canadian and US taxation are completely different. The Income Tax Act as I mentioned is based on principles unlike the US that is rules based. There are excruciatingly few tax loopholes in Canada. There are on occasion situations where the Department of Finance/Governments feel that they want to tax certain types of income higher/lower, but that's not a loophole. That's a tax rule that was perfectly fine at one point, but as time went on, CRA/Department of Finance felt it makes more sense to tax those things to meet a certain objective. This includes relatively recent changes to dividend rates, TOSI rules, income attribution and sprinkling, FAD rules, FAPI rules etc. If CRA or Department of Finance do not like certain things, they can close those out easily. This is completely different than the USA.
Tax minimizing strategies is like wanting to buy a TV right now. An awesome LG OLED. You do the research, find the retailer with the lowest price and/or wonder about deals and timing of expected mark downs and you're done, right? No, you can go further and look for coupons, or special retailer only deals (ie: Spend X, get freebies or extra value on redemption of points). Done again? No. Research credit cards for extra cash back or warranty extension options etc. Ask someone to put in all that effort for you and you paid the lowest price on that awesome LG TV. It's all legit. What you're claiming in terms of "tax avoidance" is akin to someone buying that LG OLED for one of the absolute highest prices out there or absolutely no discount, jealous someone else got it for way cheaper and lashing out screaming scam and unfair etc. It is not avoidance.
Your concept of an estate tax and not caring about double taxation is also a bit off. The reason why Canada does not have an estate tax is because Canada has many other taxes along the way that end up accumulated to significantly more overall taxes paid than a US counterpart AND reduces capital up front (in comparison to an estate tax) which also reduces opportunity cost to individuals vs their US counterparts. An individual who passes away has deemed disposition on their estate prior to distribution to the beneficiaries. There is a sudden rush of income and that income is often likely sitting in a marginal tax rate of around 50% ish. A US estate tax rate is approximately 18% up to 1 million and then 40% after that for amounts over the US citizen lifetime estate exemption of $11+ million or something like that (I am not well versed in US tax law, but it's approximately that). Not to mention, not everything is capital gains. Capital gains on the deemed disposition is basically taking the snapshot at that time of death and resetting the "pregnant liability tax clock" on the appreciation of that asset.
If someone dies, tax is paid. If you inherit it, you inherit it at the baseline tax basis. If you sell that inherited asset in 2 years or 22 years at a gain, that's when the tax is owed again. For the US situation, if I am not mistaken, that $11 million is eroded if you use it to shelter gifts. So in essence, if I am not mistaken, you could keep kicking a major chunk of that tax bill further down the road over and over and over through the beneficiaries if that asset/estate value is not over $11 million.
The last point isn't really off, but it's not really on point either. Raising consumption taxes doesn't do much of anything. In fact, we have a ton that you'd likely not recognize. Beyond GST/HST/PST have you ever seen a bill that includes a tourism tax? Deposit? Enviro? Alcohol/Cigarettes? Those are types of consumption taxes? What do they do overall to those you're arguing need to be taxed more (the rich)? Squat. Do you know who it hurts? Lower and middle income.
A consumption tax would not work as effectively as income tax for wealth spreading as you're usually hinting at. But another aspect of the income tax is that you cannot just turn up the dial and not expect a point where you suddenly stifle innovation and attract talent. Innovation wise, some of the things we have like SRED only goes so far. Lower taxes is part of the reason why the US attracts and retains so much talent. Higher tax rates isn't always beneficial if you cannot grow your pool to tax from. Lower tax rates may mean a higher bigger pool to tax from and even though it's lower rates, you end up with more overall tax income. It's an incredibly delicate balance, especially with how global our world has suddenly become.
I think many of your concepts have some merit even if I don't completely agree. However, IMO, if you want to further the discussion in a more interesting and engaging manner, you may need to better learn the concepts at hand, how to separate certain concepts for discussion and package your opinion better. You're mixing up Canada and foreign concepts together. You're mixing up different types of taxes. You're mixing up fairness and jealousy. It's OK not to know all of these concepts. Lots of what is being discussed is also extremely high level. It's fair you don't know them.
However, if you want higher level enjoyment, you might want to bring your understanding higher. This comment isn't intended to tear you down, but to encourage you to equip yourself to be able to discuss these topics at a higher level and perhaps discuss them in a manner where you could actually create good conversation that could further real life solutions in the long run. That might be "fun" to you.