Quote:
Originally Posted by blankall
Pretty simple to avoid taxes. Set up a personal corporation. You pay 11-13% tax on the money you keep in the corporation. This rate is lowered with write offs. You can also invest this money into passive investments while in corporate solution, and the profits from these investments are also sheltered.
Structure your finances in a way that any money you take out is minimal, and use write offs for things like home officers, employment use vehicles, business dinners, etc... To keep that tax minimal.
The more you make, the higher proportion of money that stays in corporate solution, and the lower the effective tax rate.
Things like capital gains exemptions, a lack of inheritance tax, trusts, etc. ensure the rich stay rich.
The only real thing the government has done to impede this is getting rid of income splitting.
Edit: disclaimer... Do not do this before talking to a tax lawyer or accountant.
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Passive income tax rate on Canadian controlled private corporations is around 50%. When you pay a dividend part of this tax is refunded but you pay tax personally on the dividend. The effect is to tax you at a rate that is similar to if you just took the income personally. In practice this is not perfect integration.
If you are talking about active business income ~~10%, the concept is that tax rate is lower so you have more cash to reinvest in your business and grow it. When you take it out as dividends and wages you pay tax personally. You can defer tax only if you are reinvesting and growing your business which makes perfect sense to me.