Tax knowledge matters. It’s the hot value-add for anyone in the business of providing financial advice. Two new reports highlight why: the tax burden of the average Canadian is significant, and helping your clients understand key tax savings opportunities matters when implementing sound wealth management strategies today.
One of these new reports, The Canadian Consumer Tax Index, 2019 Edition released by the Fraser Institute earlier this month shows that the average Canadian household paid almost $40,000 in tax in 2018, or nearly 44% of their total income. The report also shows that the average family’s total tax burden is greater than what they spent on basic costs of living, including housing, clothing, and food, which came in at $32,000.
Heading into a potential economic downturn makes this an even greater concern for two key reasons:
1. Canadians are already struggling to afford household basics and manage debt – a May 2019 Angus Reid Survey showed that 33% of Canadians are having a hard time financially keeping up, particularly following recent gas price increases. It’s a continuing trend, as an October 2018 report by the Financial Planning Standards Council indicated that 33% would fail a “financial stress test,” and face hardship should a significant unexpected expense arise. An Ipsos report from one year prior said than an unexpected expense of as little as $200 could create this situation for more than half of Canadians. Plus, they are struggling to pay down debt, too — 20% rarely (if ever) pay off their credit card balance at the end of the month.
2. The tax burden of Canadians continues to rise –The Canadian Consumer Tax Index shows that Canadians are increasingly paying more and more tax. Between 1961 and 2018, the average tax burden (for all types of tax) has increased by 2,246%, and it hasn’t always been the case that taxes paid outnumber money spent on basic necessities. In 1961, 33.5% of a family’s net income went to tax, while 56.5% went to costs of living.
How can you increase your understanding of key tax issues to help your clients remain resilient in any economic climate? It’s a topic that will be broadly discussed at DAC this November.
Tax is the greatest eroder of wealth. When you incorporate knowledge of taxation and tax-efficient strategy into your practice, you’re bringing value that your clients not only want, but need.
Additional educational resources : Expand on your knowledge of business tax issues and hone up your credentials before year-end by taking advantage of a special offer until August 31, 2019. Enrol in the MFA™-Business Services Specialist Designation and pay only $195 more to come to the Fall CE Summits. Call 1-866-953-4769 to register.
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