Time’s Up: CRA’s 100 Day Mandate for Improvement

After years of frustration on the part of tax professionals and taxpayers alike, the Finance Minister ordered the Canada Revenue Agency to clean up its act in 100 days. Specifically, the improvement plan was to run from September 2 through December 11. Finance Minister and Minister of National Revenue, Francoise-Phillippe Champagne instructed CRA to fix “unacceptable wait times and service delays.” Time’s up this week and CRA has released an update on progress. What gets measured, gets done. Let’s see what CRA’s metrics show. 

The Canada Year Book (CYB), which was first published in 1867 ñ a significant year in Canadian historyóhas just been released for purchase and download. Its data is based on the 2009 year. This year's version is now available for purchase and has just been released for download: http://www.statcan.gc.ca/pub/11-402-x/index-eng.htm. Data from 2009 is most recently analyzed, and the findings are interesting. . . . Investors Returned. Both foreigners and Canadians invested in Canadian assets as the TSX Composite Index rebounded in 2009. Spending Increased; So Did Net Worth. The effects of the 2008-2009 global recession were milder and shorter in Canada than in other G7 countries. In 2009 consumer spending increased slightly and government spending rose considerably due in great part to economic stimulus. Personal income and national net worth increased slightly, while net foreign debt increased due to our strong dollar and the deficit. Purchasing Power. The purchasing power of Canadians and household spending increased in 2008. An increase in export prices due to a strong demand for resources made the cost of imported goods more affordable. Non-Discretionary Spending. Low income households spent 52% of their budgets on food, shelter and clothing while wealthy households directed only 28% of their budgets to basics. Women and Work. In 7 out of 10 families both spouses were working in 2008, compared to 4 out of 10 in the mid-1970s. Women are working longer and earning more and the percentage of women who are equal or primary breadwinners has risen. Working Moms In 40's Doubles. More women are delaying childbirth in order to complete their education and launch careers. Over the last 20 years the number of mothers in their 40s with preschool age children has doubled! The number of working mothers with young children also doubled to 74% from 1976 to 2008. Next time: CANADA HAS LOWEST PROPORTION OF SENIORS IN OECD ADDITIONAL EDUCATIONAL RESOURCES: INTRO to personal tax

Over the years, the wealth of Canadians has grown due in great part to increases in housing values. But, as the Governor of the Bank of Canada, Mark Carney, pointed out last month, a correction to the housing market in Canada is a distinct possibility. An increase in interest rates and a housing correction could change things in a hurry. Canadians should pay attention to debt reduction as a sure way to increase net worth. This is backed up by a report by The Economist, which has just published a survey of global house prices in which it compares the ratio of current house prices with rents: http://www.economist.com/node/17311841?story_id=17311841&CFID=146602169&CFTOKEN=17636472 . It determined that Canadian houses are overvalued by almost 24%. Certainly a decline in housing activity would diminish the net worth of many Canadians, yet another potential blow to those contemplating pre-retirement. According to Statistics Canada, the benchmark of housing affordability is 30% of income. One in five Canadians exceed this threshold with single people, single-parent families, renters, home owners with mortgages and recent immigrants making up a large part of this group. More Canadians own homes than rent them and this has increased since 1986. However, household debt increased to $145 for every $100 of disposable income in 2009, up from $139 in 2008. Astute advisors will address the emerging issues now, finding ways to shore up wealth by minimizing costs and debt, and increasing tax efficiency of incomeóboth passive and active. ADDITIONAL EDUCATIONAL RESOURCES: Elements of Real Wealth Management Course

The Provincial Tax rates for the lowest two income tax bracketsófocusing on incomes under $72,000 will drop for tax year 2011, making BC one of the most tax competitive jurisdictions in Canada. Together with low marginal rates of taxes on dividends and corporate taxes, BC is emerging as a mini tax haven.  BC Personal Income Tax Rates 2011 Tax Year   Tax bracket Current rate New rate $0 to $36,146 5.06 % 4.30 % $36,146 to $72,293 7.70 % 6.525 % $72,293 to $83,001 10.50 % 10.50 % $83,001 to $100,787 12.29 % 12.29 % Over $100,788 14.70 % 14.70 %

For people who want to think strategically about the role of money in their life.   Click here to read the latest blog entry by Evelyn Jacks.

Businesses purchasing new computers and systems software from January 27, 2009 until midnight of January 31, 2011 can claim a 100% capital cost allowance with no half-year rule. These purchases are included in Class 52 of depreciable properties. Now is a good time for advisors and clients to be in contact to review asset acquisition strategies with business owners to benefit from preferred timelines for tax write-offs. Included in other common year end asset reviews are purchase of vehicles, buildings, furniture and fixtures. Purchases of any of these assets before year end will increase the opportunity for tax savings using capital cost allowances. Additional Educational Resources: Enrol in Tax Preparation for Proprietors

On October 19, 2010, CRA released the updated RC4022, "General Information for GST/HST Registrants, which provides information on several new developments on the GST/HST front. Advisors and their clients have been working through the introduction of the HST in BC, ON and Nova Scotia, on July 1, 2010. For the Province of Ontario the HST combines the retail sales rate (8%) with the G.S.T. (5%) for a combined HST of 13%. In British Columbia the retail sales tax (7%) harmonized with the GST (5%) for an HST of 12%. Nova Scotia increased its HST from 13% to 15% on July 1st combining a 10% provincial sales tax with the 5% GST. Of note in the news: Electronic filing of GST/HST returns will be mandatory for most registrants and this document outlines several options for this. As of April 12, 2010, four-digit access codes will be assigned by CRA for all GST/HST registrants for e-filing purposes. Penalties will apply if you are required to file electronically and you fail to do so. The "place of supplyî rules determine whether suppliers must charge GST/HST. New rules as of May 1, 2010, use the location of the consumer of the supply rather than the location of the supplier. For example, if a resident of Nova Scotia purchases and receives delivery of an item from Ontario he will pay 15% HST. A resident of British Columbia purchasing the same product would pay 12%. There are new rules for financial institutions and simplified reporting for network sellers (direct sales). CRA now offers an installment calculator for businesses that can be accessed under "My Business Accountî www.cra.gc.ca/mybusinessaccount To view RC4022 in its entirety you can visit: http://www.cra-arc.gc.ca/E/pub/gp/rc4022/README.html These changes will be discussed in detail at the Distinguished Advisor Workshops, one day CE workshops featuring November Year End Planning Strategies for business owners, coming to Winnipeg, Calgary, Vancouver, Toronto and Ottawa, November 3 to 9 . To register Click here