Canadians should watch for four measures in next week’s Budget to assess whether the government has kept its promises for tax fairness.
“Taxpayers feel the system is stacked against them when politicians use tax fairness as a slogan and not a principle”, says Dennis Howlett, Executive Director of Canadians for Tax Fairness. “The federal budget loses $10 billion in revenue each year to tax havens and stock option loopholes that cater to the super-wealthy. Politicians have spent $43 billion on ineffective tax cuts since 2006. If you want a balanced budget, stop bleeding money in the first place.” The tax fairness watchdog has outlined four items that should be in the federal budget to get Canada back on the road to a fair tax system.
1. Clamp down on Offshore Tax Havens: Canadian money in offshore tax havens is at an all-time high - $178Billion. Most of it untaxed. And data leaks from Swiss and Luxembourg banks contain names of Canadians trying to game the system. Meanwhile, the Canada Revenue Agency has had more cuts than any federal department. “Offshore tax evasion is a 21st century problem,” says Howlett. “This budget has to include the resources to build a team that can track and prosecute on behalf of the rest of us.”
2. Elimination of the Stock Option Loophole. With an annual loss of nearly $1Billion each year, this tax deduction enables wealthy CEOs to avoid tax on 50 per cent of income received when they cash in stock option bonuses. “Even Canadian senators and former Prime Ministers use this loophole,” says Howlett. “It is pretty straightforward to fix – a Budget Day announcement that they have finally cancelled it.”
3. Elimination of Income Splitting: The late former Finance Minister Jim Flaherty first promised income splitting. He then changed his mind when he realized the math didn’t add up and it would be $2.8 Billion annual expense skewed in favour of the wealthy. “Some Canadians may be getting a $360 pre-election cheque because the Harper government tied this tax measure to a heavily advertised Child Benefit program. It is a political charade that doesn’t help families in a concrete way,” says Howlett. “If you hear Joe Oliver say the phrase income splitting on Budget Day, it is a signal that we have a Finance Minister who can’t read a balance sheet.”
4. Holding the Line on the Tax Free Savings Account. This program was meant to help ordinary Canadians save for retirement. But the average Canadian can barely afford to put aside the annual $5.500 maximum. Finance Minister Joe Oliver’s promise to double the limit to $11.000 a year has been called a “ticking time bomb” by financial experts on all sides of the political spectrum. That’s because lost revenue to federal and provincial governments will reach tens of billions as plans mature. “Data shows that long-run benefit from doubling TFSA limits would go overwhelmingly to the wealthy,” says Howlett.