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Old 09-21-2021, 11:38 PM   #21
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Sigh. Was hoping this would get an honest conversation going, but so far all that's been offered is a bunch of trickle down economics, bootstraps kind of stuff. Am I really the only one on CP who sees a serious problem with the wealthy tip toeing around the tax laws like this, especially during a time when governments are running record deficits?
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Old 09-21-2021, 11:48 PM   #22
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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.
I ask every firm I work at if I can do this. They wonít let me (need to be a partner) - I donít see why legal associates canít take advantage of it the same way ďincomeĒ partners or associate counsels can
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Old 09-21-2021, 11:54 PM   #23
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Sigh. Was hoping this would get an honest conversation going, but so far all that's been offered is a bunch of trickle down economics, bootstraps kind of stuff. Am I really the only one on CP who sees a serious problem with the wealthy tip toeing around the tax laws like this, especially during a time when governments are running record deficits?
Sorry. I know my own bad writing and ignorance clouded the sentiment in my previous post. I do 100% believe that the tax policy of most governments is designed to concentrate wealth in the already wealthy's hands.

Monetary policy, as well, can be used for this end. The current inflation and housing market issues are going to make the divide between rich and poor massive. In North America especially, people have historically used their homes to acquire wealth. For most people under 40, in many parts of North America, this is quickly becoming no longer an option.
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Old 09-22-2021, 12:51 AM   #24
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Sigh. Was hoping this would get an honest conversation going, but so far all that's been offered is a bunch of trickle down economics, bootstraps kind of stuff. Am I really the only one on CP who sees a serious problem with the wealthy tip toeing around the tax laws like this, especially during a time when governments are running record deficits?
This is an issue worldwide though. As long as the are different tax rules in different jurisdictions, such things will always happen where the ultra rich play things grey enough they cannot be prosecuted. Plenty of people in BC nab high priced purchases here to save PST if they can justify the trip over the extra paid on PST. What about someone hiring someone under the table to cut costs on repairs? It's the same concept but more advanced rules with more foreign jurisdictions and tax havens entering the game.

Ignore the tax label for a sec. If you could get a phone unlimited data plan out of province for half what you pay where you live and not outright violate any rules, would you? Similar concept, different topic. I can't comment on ultra rich, but the vast majority of the rich follow the rules. They just are able to access options other normal people cannot and for some, that's unfair. If the cra deems it unfair because it erodes the Canadian tax base, they will close those options reasonably quickly.

Id also be careful with using broad strokes. Just because someone is rich doesn't automatically mean they skirt the rules. Ethics aren't directly tied to wealth. I've seen scumbags on both ends of the spectrum. I always advise my clients to do things right or find someone else. Some of them were mad when they were paying more taxes year after year, then you couldn't wipe the grin of their faces when cra blitzes the industry and they watched others in the industry get absolutely wrecked while they were unscathed. Others left to find someone else and I was elated I had less shape up or ship out conversations. I've met many people who pay yearly taxes easily worth a decade of my gross wages (not even net wages).

Last I recall, I heard some rumors the CRA were gearing up for one hell of a blitz. Underground economy, especially construction seemed like their next target, but that went quiet just before covid. My buddy mentioned he heard rumors of some major IT upgrades and hiring, so there's the speculation that crypto is going to be another target for a blitz as well. I hiring think cra is waiting on a gotcha moment for these two targets. Lately it seems they've been more concerned about late filings and late installments.
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Old 09-22-2021, 12:53 AM   #25
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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.
Yes, but this doesn't avoid tax, it only defers it. Once you take the money out of the corp, in order to have it and spend it personally, you pay the remaining tax.

And for those that aren't familiar with this, corps pay a corporate tax rate, then, when rolled out to personal shareholders, they pay a dividend tax.

corp tax + dividend tax = personal income tax (approximately).

Also, as someone else mentioned, there is no estate tax, however, death is a deemed disposition and capital gains taxes become due (except for the spousal rollover of course, which also is a deferral , not an avoidance).
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Old 09-22-2021, 12:57 AM   #26
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Sigh. Was hoping this would get an honest conversation going, but so far all that's been offered is a bunch of trickle down economics, bootstraps kind of stuff. Am I really the only one on CP who sees a serious problem with the wealthy tip toeing around the tax laws like this, especially during a time when governments are running record deficits?
What is it you were hoping for exactly? For everyone to say "yeah, tax the rich, dammit!"?

What do you think should be done?

Do you know what happens if you increase tax rates on the ultra wealthy? They don't pay more taxes, they take their money and move to a more favorable tax environment.

IMO, it is better to have them stay, and spend money and hire people in their businesses here, than to have them leave and take their money with them.
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Old 09-22-2021, 12:57 AM   #27
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Yes, but this doesn't avoid tax, it only defers it. Once you take the money out of the corp, in order to have it and spend it personally, you pay the remaining tax.

And for those that aren't familiar with this, corps pay a corporate tax rate, then, when rolled out to personal shareholders, they pay a dividend tax.

corp tax + dividend tax = personal income tax (approximately).

Also, as someone else mentioned, there is no estate tax, however, death is a deemed disposition and capital gains taxes become due (except for the spousal rollover of course, which also is a deferral , not an avoidance).
Yes and no. The government felt it unfair recently and revised the rates. There's up to 3-11% "leakage" doing corp tax plus dividends. Plus passive income over a threshold is now at a higher rate than personal tax rate. In most situations, it's more tax effective to take it as wages than dividends now.

Good point on the tax deferral part. You'd be surprised how many people don't understand how this concept works for an RRSP and needlessly contribute to it and claim it in the lowest tax bracket.
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Old 09-22-2021, 01:02 AM   #28
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Yes and no. The government felt it unfair recently and revised the rates. There's up to 3-11% "leakage" doing corp tax plus dividends. Plus passive income over a threshold is now at a higher rate than personal tax rate. In most situations, it's more tax effective to take it as wages than dividends now.

Good point on the tax deferral part. You'd be surprised how many people don't understand how this concept works for an RRSP and needlessly contribute to it and claim it in the lowest tax bracket.
Yes, many people completely screw the pooch when it comes to RSPs. That's a conversation for another thread.

As to the first part, yes, the combined corporate and dividend rates can be higher than income tax rates in many cases. And yes, passive income in a corp gets hammered pretty hard - I meant to mention that too. Thanks.
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Old 09-22-2021, 06:26 AM   #29
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Sigh. Was hoping this would get an honest conversation going, but so far all that's been offered is a bunch of trickle down economics, bootstraps kind of stuff. Am I really the only one on CP who sees a serious problem with the wealthy tip toeing around the tax laws like this, especially during a time when governments are running record deficits?
If you want to get a real discussion going post some quotes from the video and explain why you agree or disagree.

Posting a video and asking others to watch might be the worst way to convey information. Itís slow relative to reading and very difficult to fact check.
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Old 09-22-2021, 06:45 AM   #30
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Sigh. Was hoping this would get an honest conversation going, but so far all that's been offered is a bunch of trickle down economics, bootstraps kind of stuff. Am I really the only one on CP who sees a serious problem with the wealthy tip toeing around the tax laws like this, especially during a time when governments are running record deficits?
Ease up on deficits...if you run deficits, print money, keep rates low, the currency is stable/sovereign, you own your food, water, and energy supply. You just give the money you print to pay the deficits to the lower end of the wage spectrum. Guess what...you've got taxes on the rich with out getting voted out instantly.
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Old 09-22-2021, 07:05 AM   #31
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Sigh. Was hoping this would get an honest conversation going, but so far all that's been offered is a bunch of trickle down economics, bootstraps kind of stuff. Am I really the only one on CP who sees a serious problem with the wealthy tip toeing around the tax laws like this, especially during a time when governments are running record deficits?
Who said anything about trickle down economics?
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Old 09-22-2021, 07:28 AM   #32
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Who said anything about trickle down economics?
Yeah, I just want to know the tricks of the trade so I can pay less tax when Iím older and slightly wealthier.
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Old 09-22-2021, 07:54 AM   #33
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Yes, but this doesn't avoid tax, it only defers it. Once you take the money out of the corp, in order to have it and spend it personally, you pay the remaining tax.

And for those that aren't familiar with this, corps pay a corporate tax rate, then, when rolled out to personal shareholders, they pay a dividend tax.

corp tax + dividend tax = personal income tax (approximately).

Also, as someone else mentioned, there is no estate tax, however, death is a deemed disposition and capital gains taxes become due (except for the spousal rollover of course, which also is a deferral , not an avoidance).
If you can defer tax for 30+ years that's a mega advantage. My biggest issue is that you can also defer tax on passive income not related to the business. If middle class wage employees can't do that, why can business owners, lawyers, consultants, real estate agents, etc...

Edit $500k of passive income is tax free. Still very significant and likely well beyond what most Canadians have saved.

Last edited by blankall; 09-22-2021 at 07:59 AM.
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Old 09-22-2021, 07:56 AM   #34
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LOL. Our entire economic system is built to reward "savers".
30 or 40 years ago it was far better to be a saver than it is today. With 15% interest rates anyone with brains saved to buy a fridge or car instead of borrowing. Savers could invest their money in risk-free vehicles with guaranteed 15% returns. Paying off a mortgage early yielded major, major benefits. It was difficult to get a credit card, and limits were low.

Today governments and banks are so desperate to keep the wheels of the consumer economy spinning that interest rates are near-zero and they’ll give loans and lines of credit to anyone with a pulse. You can buy everything from sofas to TVs to cars on credit with zero down. Someone who paid for home renos or a vacation with a line of credit used to be regarded as reckless. Today it’s perfectly normal.

On the other side of the equation, risk-free bonds and GICs yield 1 per cent returns. Retirement savings either yield low returns, are carry high exposure to risky equities that can plummet in value in an afternoon.

As a consequence, the dread of debt has more or less faded from our culture, and even when mortgages are removed from the calculations, Canadians carry far more debt than their more prudent parents and grandparents did. Personal savings rates are lower than they’ve been in generations.

Frankly, in today’s economic climate you’re kind of a chump if you save.
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Old 09-22-2021, 08:17 AM   #35
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I like the sentiment of 'tax the rich', but when you look at the stats something like the top 20% of earners pay 65% of all the income tax. I know that income tax is only a portion of the tax bill but to me, it looks like we are taxing the rich and they are paying their taxes.
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Old 09-22-2021, 08:32 AM   #36
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Frankly, in todayís economic climate youíre kind of a chump if you save.
Depends on your goals really, we save over 50% of our income because we plan on retiring in our early 40s, but this is definitely not a typical retirement plan
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Old 09-22-2021, 09:13 AM   #37
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Sigh. Was hoping this would get an honest conversation going, but so far all that's been offered is a bunch of trickle down economics, bootstraps kind of stuff. Am I really the only one on CP who sees a serious problem with the wealthy tip toeing around the tax laws like this, especially during a time when governments are running record deficits?
How were we even supposed to know your opinion on the matter when you legitimately just posted a title and 2 videos to go along with it?

As some have stated, 'tax the rich' is not a solution. When you have other favorable tax jurisdictions with low barriers to entry you will see the rich leave and take their tax dollars with them. Look at Murray Edwards. Another consideration is that unlike the US which each citizen is taxed on worldwide regardless of place of residence, Canada only taxes deemed residents. That is to say if I want to cut ties with Canada temporarily and live elsewhere, I will not pay a penny in taxes to Canada.
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Old 09-22-2021, 09:19 AM   #38
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The rich are always going to get away with avoiding taxes and I don't think there's any way around that. I don't know why people lose sleep over this wealth disparity thing that's been going on since the beginning of man as we have no control over this as the politicians that claim they will combat tax evasion are also playing the game themselves.
Because some of us have picked up history books at various points in our lives.
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Old 09-22-2021, 09:39 AM   #39
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Because some of us have picked up history books at various points in our lives.
and did you learn anything particular in those books that you would like to add to the conversation?
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Old 09-22-2021, 09:51 AM   #40
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and did you learn anything particular in those books that you would like to add to the conversation?
Generally speaking, massive levels of wealth disparity have historically been linked with high levels of social upheaval, instability, and a whole host of other issues.
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