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?

Effective and equitable taxation requires a defined tax base. In Canada, income taxes are levied from a ësource'. The Income Tax Act (the Act) does not define ëincome' anywhere- it has always been based on the source concept. Segregating income by source was first conceived in the United Kingdom in a piece of legislation titled Addington's Act of 1803. This legislation allowed taxpayers to file separate returns for each source of income so that no single government official would know the total of each person's income. The distinction between capital (the source of income) and income itself was explained by Justice Pitney of the United States in Eisner v Macomber (1919): "The fundamental relation of ëcapital' to ëincome' has been much discussed by economists, the former being likened to the tree or the land, the latter to the fruit or the crop; the former depicted as a reservoir supplied from springs, the latter as the outlet stream, to be measured by its flow during a period of timeî. Capital gains or losses arise from the sale or disposition of the source itself. Section 3 of the Act is unavoidably tautological: "The income of a taxpayer for a taxation yearÖis the taxpayer's income for the yearî. Sources of income are listed (office, employment, business, property, and capital gains), but they are not exhaustive. Thus, Section 3 states that any other source is also taxable. Income from each source is determined by: a) Characterizing receipts as either income or capital; b) If income, classifying it by source; c) Deducting expenses applicable to each source to establish net income; and d) Aggregating the various sources of net income per Section 3. As a result of various government social policies and objectives the source doctrine is not completely followed in every circumstance though. For example, Section 12 lists specific inclusions and Section 81 specific exclusions. The source doctrine does not include gambling gains or gifts and inheritances in income. The reason for this is that these represent non-recurring amounts or the transfer of old wealth; according to the source doctrine, income involves the creation of new wealth, and these do not stem from a productive source. A residual category of exclusion, called ëwindfall gains' has proven problematic in Canadian tax jurisprudence. According to the ëSurrogatum Principle', another British legal doctrine adopted by Canada, amounts received in place of income from a source may be included in income. For example, amounts received as civil damages, or for breach of contract or tort can be classified as income (legal rights to income stemming from a source). Greer Jacks is updating jurisprudence in the EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients. His subject is a bitterly disputed, and expensive one and he reflects on his experiences in reading recent cases. Additional Educational Resources: Evergreen Explanatory Notes and DFA-Tax Services Specialist Designation  NEXT TIME: A PLEA FOR TAXING CONSISTENCY: Two examples will show the difficulty that Canadian courts have had in attempting to apply these principles of taxation.  

Private sector economists have revised down their outlooks for U.S. real GDP growth significantly since Budget 2011. Private sector economists expect growth of 1.6 percent for 2011 and 2.0 percent in 2012, down from 3.1 percent growth expected in both years in the budget In Europe, recent economic indicators, in particular indexes of manufacturing and service activity, suggest that the Euro zone may already be in recession. Meanwhile, Canada has signed an updated international agreement to combat cross-border tax evasion at the November 3 meeting of the G20 leaders to enhance information sharing. Said Minister Flaherty, "A secure tax base contributes significantly to a sound economy, which is more important than ever in these challenging economic times.î Tax evaders, beware. Additional Educational Resources: The Knowledge Bureau has added an update to its Cross-border Taxation course to cover the new US Tax Filing Requirements and Business Services Specialists Designation

Canada, along with Germany, will continue to enjoy the strongest growth on average in the G-7 over the 2011ñ12 period, however, despite this, private sector economists have revised down their outlook for real GDP growth in Canada since the 2011 budget, particularly for 2011 and 2012, as reported in this week's Updated Economic and Fiscal Projections. Real GDP in Canada is now expected to grow by 2.2 percent in 2011 and 2.1 percent in 2012, down from expectations of 2.9 percent and 2.8 percent, respectively, in the 2011 budget. As a result, the projected level of nominal GDP,the broadest single measure of the tax base, is now significantly lower than the planning assumption presented in the budget. As a result, the government has announced that it will reduce the maximum potential increase in Employment Insurance (EI) premium rates in 2012 from 10 cents to 5 cents and temporarily extend the enhancement to the Work-Sharing Program. Additional Educational Resources: Financial Recovery in a Fragile World Book; Distinguished Financial Advisor Workshop January  

According to a labour force survey, a 50-year-old Canadian man or woman in 2008 could expect to be in the workforce for at least 3.5 years longer than his counterparts in the mid-1990's. The average age of retirement has been stable since 2004 at about 62. Similar increases in life expectancy have stabilized the expected length of retirement at around 15 years for men and 19 years for women. Although hours of work must be taken into consideration, delayed retirement could mitigate some of the economic challenges of population aging the study revealed. With baby boomers staying put longer though, recent post-secondary graduates join the long queue waiting for job opportunities to arise. For more info: http://www.statcan.gc.ca/daily-quotidien/111026/dq111026b-eng.htm   Additional Educational Resources: Distinguished Advisors Workshop January and Master Your Retirement - How to Fulfill Your Dreams With Peace of Mind (2012 Version)  

  CRA has just announced the maximum contributory earnings for 2012 under the CPP, and  those figures generate a premium increase which at the maximum level will reach $2306.70 or $192.23 per month. Both employer and employee are required to contribution, which means that proprietors will pay $384.45 a month or $4613.40 when their contributory earnings are $50,100. The basic exemption remains at $3,500 (this amount has not been indexed to inflation for years) and therefore we see that premiums have actually increased by 4%. Meanwhile the expected rate of CPI inflation for 2012 has just been announced as well: it's 2%. That's quite a hike. This means that the maximum CPP pension for 2012 will be $986.67 per month. (Average of maximum pensionable earnings for last five years x 25% / 12 months)   Additional Educational Resources: Distinguished Advisors Workshop, Financial Recovery in a Fragile World book.  

General retrenchment of risk taking in the global economy has inhibited recovery in many areas. Uncertainty abounds in Europe, while weak consumer and investor confidence in the United States is expected to result in weak GDP growth. Sharp appreciation of the Yen is frustrating recovery and reconstruction in Japan, coupled with a decreasing demand for their consumer products. Growth in China, India, and other emerging markets is expected to slow to a more sustainable pace over the next year. While Canada is still in the eye of the global economic storm relatively, the domestic forecast has taken a turn for the worse since the summer. Domestic demand is likely to remain the primary area of growth, although at a slower pace than anticipated. Exports, on the other hand, are expected to remain weak, due to low foreign demand exacerbated by the persistent strength of the loonie. The Bank expects growth in Canada will be slow through mid-2012, but should pick up if the global economic environment improves and confidence is restored; it is projected that the economy will expand by 2.1 per cent in 2011, 1.9 per cent in 2012, and 2.9 per cent in 2013 with a return to full capacity by the end of that year. As a result of all of this, the Bank has decided to maintain the target for the overnight rate at 1 per cent and fiscal policies consistent with achieving the 2 per cent inflation target over the medium term. For more info: http://www.bankofcanada.ca/2011/10/speeches/opening-statement-83/ Additional Educational Resources: Debt and Cash Flow Managment, Financial Recovery in a Fragile World