[Mathgod]

Originally Posted by DoubleF

Spoiler!

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.

If any of this was driven by jealousy, or all I cared about was my own financial well being and furthering my personal self interests, there's no way I'd ​be advocating a policy that would be of detriment to me personally. And I certainly wouldn't be spending my time posting on CP about things like inequality, climate change, etc. Nothing about this is "fun" for me, as you seem to suggest.

Your post, while containing lots of good information regarding tax policy, comes across as not seeing the forest for the trees. You're putting all the emphasis on the fine print/technical details of each policy, and not bothering to get at the heart of what truly matters here. Wealth inequality continues to get increasingly stark, more and more of the world's wealth (and the political power that comes with it) is concentrating into fewer and fewer hands, and the system that those people are using to grow their wealth at historic levels is the same system that's polluting our environment into oblivion. What's more, the big winners of a global pandemic that has caused incalculable human suffering have been the wealthiest members of society. You can probably guess who the big winners of climate change are going to be...

If it seems like I'm mixing up Canadian & US policies here, it's because wealth inequality is a global problem, and the only way to fundamentally solve it is to do so on a global scale. In that sense it's just like climate change; it's a problem that needs a collaborative effort by the global community to tackle. That said, it's still important to make changes here in Canada, as the issue of how much of the nation's tax burden should fall on whose shoulders, is an important topic to broach.

GST hurting middle class... fair point.

Tax avoidance vs tax minimizing... seems like an argument of semantics/technicalities. Ultimately they are getting at the same concept: ways to legally reduce one's taxes. The distinction there doesn't have much of a difference, IMO.

Your TV analogy doesn't make much sense to me. Of course there's nothing wrong with a person doing everything possible to buy a product at the lowest possible price that a business is willing to sell it for, just like there's nothing wrong with a person doing everything that's legally allowed within the tax code. My issue is with the tax code itself. It does seem like we could find ways to reduce the tax minimizing strategies that the wealthy have available to them. You contend that this would lead to a mass exodus of talent and innovation, I would contend that we're not near that threshold yet. I also think that governments place too much emphasis on attracting & retaining talent. Is it important? Of course it is. But not as important as a lot of people make it out to be. For all the talent the US has, they have a disturbingly high rate of poverty.

So do I have a perfect smoking gun plan with every single detailed ironed out? No. But that doesn't mean that wealth inequality isn't a major problem, nor does it mean there's nothing we can do about it.