Tax Pros: Canada’s Tax System Has Taken a Big Hit

Canada’s tax and financial pros weighed in enthusiastically on last month’s two-part Knowledge Bureau Report Opinion Poll in which we asked: "Do you believe Canada’s tax system based on self-assessment, has suffered under recent changes at CRA and by Finance Canada?" 71% said yes. Part 2 was this question: "If so, what is the one wish you have for tax reform?" The responses were very interesting:

The Federal Budget of April 7, 2022 represents a much brighter economic outlook for Canada and contains a sprinkling of tax provisions that most importantly did not raise any tax rates or impose new capital gains taxes.  However, there is a warning that this could be on the horizon as early as this fall.

The Finance Department has announced that the Federal Budget will be on April 7, 2022.  Your Knowledge Bureau Special Budget Report team will provide full details.  Then join us comprehensive analysis and CE Credits with Evelyn Jacks and the Knowledge Bureau Faculty at the May 18 Virtual CE Summit for the effect of budget and economic change on Retirement and Estate Planning.   

On March 23, 2022, the Federal Government announced the increased payments for the Climate Action Incentive (CAI) for the 2022-23 period and some Canadian households will soon receive over $1,000. But not through their tax filings, a change from last year.  It’s a recycling of federal carbon tax surtaxes.  Here’s what you need to know:

How much money can Canadians earn before they have to pay federal taxes?  The answer lies in the structure of the basic personal amount (“BPA”) -  an annual earnings amount that is anything but easy to understand; especially since all the provinces and territories have their own BPAs to add to the confusion.  Here’s how to help taxpayer – especially newcomers to Canada – wrap their heads around this:  

If you are hiring family members over the age of 25 you may need to justify that the payments, you have made are reasonable in order to avoid a Tax on Split Income or TOSI.  Specifically, according to the CRA, the reasonableness of an amount paid to your family member will be evaluated based on one or more of the following criteria:

Striking a balance between upholding Canadian taxation laws and privacy concerns is challenging for policy makers and legislatures. On February 4th, 2022, the Minister of Finance released draft Income Tax Act legislation that increases reporting requirements for most Canadian resident trusts. The new trust reporting requirements will allow the Canada Revenue Agency to better combat tax evasion and increase clarity regarding beneficial ownership of assets.