May 2025 Poll

Does the Liberal promise expected soon to cut the lowest personal income tax rate by 1% to 14%,  go far enough to help Canadians impacted by high costs?

In advance of anticipated recessionary times, disaster management requires that governments review the sustainability of important social programs like the Employment Insurance (EI). But will labor markets contract because of economic volatility or demographics? The reasons could make a difference in rate structure. Statistics Canada, released a study on August 17 which estimates that the labour force is projected to grow to between 20.5 million and 22.5 million by 2031. At the end of 2010, it was 18 million. In the interim, however, a significant slowdown in the rate of growth in the labour force is predicted, however, primarily because of the retirement of baby boomers. Between now and 2016, it is expected to slow to less than 1%, and it will stop its decline after 2026, when baby boomers will have left the marketplace. By 2031, about one in three people in the labour force could be foreign born, which points to the role of Canada's immigration policies in replacing the boomer workforece. How these trends impact the setting of EI rates and benefits is the subject of a series of national consultations, announced by the federal government on August 18. Certainly one of the objectives is not to impede a fragile economic recovery by increasing rates at this time. Yet a plan needs to be put into place to deal with the EI operating deficit, which is not expected to a cumulative positive balance until 2015. The government is requesting your thoughts on these three questions by November 30: ∑ What is a reasonable amount of time in which the EI program should be expected to break-even? (i.e., 2 years, 5 years, 10 years, etc.) ∑ What is an acceptable maximum annual change in EI premiums? ∑ What should be the rate-setting process? Related Document:   Employment Insurance Premium Rate Setting   Additional Educational Resources:    

  Evelyn Jacks, Your Money, Your Life   To read the latest blog entry by Evelyn Jacks: Cash Flow Plan: September 15 Instalment Can Be Avoided  

Canadian taxpayers and investors may be feeling a bit jittery about market volatility but Jim Flaherty, Minister of Finance, says we are in good shape, all things considered. He told the House of Commons Standing Committee on Finance last week that Canada is well positioned to face global economic challenges posed by challenges in the US and Europe. However, the global recovery is fragile, he said, and both governments and individuals need to manage potential fiscal challenges accordingly. While the news coming from the US is not greatóthat the country is in the midst of its weakest recovery since the Great Depression according to Bank of Canada Governor Mark CarneyóCanadians can direct efforts to prepare for a prolonged recovery period. Fiscal sustainability is fundamental, he warned, both at government levels, but also by households, citing that Canadians are as indebted today as Americans and the British. Financial advisors, therefore can take the lead with their clients to discuss debt and cash flow management sooner, rather than later. The Finance Minister, for his part, plans to update the economic and fiscal outlook for Canada later this fall, but in the meantime is committed to return to budgetary balance a year early, by 2014ñ15, through its deficit reduction action plan.     Additional Educational Resources:  

The Westminster Principle, named after the 1935 House of Lords decision in The Duke of Westminster's Case, holds that a taxpayer can legally arrange their affairs to minimize tax payable, regardless of motive. This tenet of our tax jurisprudence is seemingly contradicted by Canada's General Anti-Avoidance Rules (GAAR) which were introduced in 1988. In 1984 the Supreme Court in Stubart refused the Government's argument that transactions must have a legitimate business purpose. Following this decision Parliament added section 245 of the Income Tax Act which now provides the CRA with an opportunity to reassess taxpayers who have complied with the letter of the law, but who they feel have "misused or abusedî the provisions; uncertainty is inescapable. Fortunately, Canada retains the structure of the British common law system that upholds the rule of law and the separation of powers between the three branches of government- legislative, executive, and judicial. The independence of the judiciary is therefore a cornerstone of our system, and recent judgments from the Tax Court of Canada and the Federal Court of Appeal re-affirm that autonomy. This is good news for taxpayers challenged by creative CRA claims that they have "misused or abusedî the provisions of the Act in order to produce a tax benefit. In Lehigh Cement Limited v. Canada, 2010 FCA 124, the CRA contended that Lehigh had contravened the spirit and intention of the Act in structuring its finances; the Federal Court of Appeal unanimously disagreed and provided some valuable information. At paragraph 37 the court stated: "the fact that an exemption may be claimed in an unforeseen or novel manner, as may have occurred in this case, does not necessarily mean that the claim is a misuse of the exemption. It follows that the Crown cannot discharge the burden of establishing that a transaction results in the misuse of an exemption merely by asserting that the transaction was not foreseen or that it exploits a previously unnoticed legislative gap.îFurthermore, in Collins & Aikman Products v The Queen, 2009 TCC 299 the court cited the words of Paris J. in Landrus v. The Queen, 2008TCC274, where it was stated: "the Minister has tried to use the GAAR to fill in what he perceives to be a possible gap left by Parliament; that would be an inappropriate use of the GAAR.î These sort of judicial statements are reassuring for Canadian taxpayers and lawyers. The continuing independence of the judiciary has mitigated the seemingly limitless ambit of the GAAR and the CRA's ability to question the purpose of certain business transactions. The judiciary are bound by the legislation that Parliament enacts, but they undoubtedly strive to protect taxpayers from aggressive and asinine assertions from the CRA who attempt to claim that the GAAR is a set of ëcatch-all' provisions for any transactions that they feel provide a tax benefit unforeseen by Parliament. The GAAR creates uncertainty in the law, which is never a welcome attribute. The rule of law, the notion that all laws should be made prospectively and not retroactively, that they should be clear and available to all concerned, and that nobody should suffer a loss of liberty as a result of arbitrary governmental power, is the foundation of the Westminster Principle and our common law system. The GAAR sits uncomfortably with these long held principles and therefore the independence of the judiciary is more important than ever in Canadian tax law jurisprudence. The common law, meaning the binding and/ or persuasive judicial statements and interpretations of legislation and previous case law, will continue to be the only avenue of clarity for the nebulous General Anti-Avoidance Rules unless Parliament amends them. It will be interesting to see whether the Westminster Principle can stand its ground with the help of the judiciary or whether the GAAR will ultimately prevail; these recent comments offer a shimmer of hope for Canadian taxpayers. Greer Jacks is a research assistant with the Knowledge Bureau working out of Victoria, BC, and has been contributing to court case updates in EverGreen Explanatory Notes.   Additonal Educational Resources:   <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com🏢office" />

Evelyn Jacks, Your Money, Your Life   To read the latest blog entry by Evelyn Jacks: Following Investment Advice in Volatile Times

If recent market volatility is on the mind of investors and taxpayers, no doubt a chat about recovery time is in order, particularly when taxpayers have about a decade left before retiring. The calculations below assume that the investor's savings of half a million are in a registered account so that the earnings are not eroded by income tax for the purpose of this illustration.They have lost half their value in market turmoil. How long will it take to recover? Rate of return will matter, a lot. So will inflation protection. Doing the math, if this investor were to invest his entire remaining portfolio in 10-year government bonds, which are currently yielding 2.88%, his saving would have recovered to $332,085 at the end of 10 years. In order to make it back to $500,000 before retirement, he must add an additional $14,730 to the pot each year. He should also keep in mind that, depending on inflation rates over the next ten years, that $500,000 could have a purchasing power of less than what $400,000 has today. Astute investors will be looking to their tax and financial advisors for help with this significant challenge to find cost, tax and debt management efficiencies to help build up the fortress. Additional Educational Resources: Registered vs. Non-registered investment calculator, available in EverGreen Explanatory Notes.