How <and Why> the Rich Get Even Richer : CRA SOTW
Alan Baggett
Canada's offshore tax dodge
Diane Francis, Financial Post
Published: Saturday, May 03, 2008
For nearly 40 years, Canada's richest individuals have been able to
get off scot-free from paying income taxes. So have their children.
The fix is not difficult and some areas where reforms can be imposed
are outlined below. Even so, Canada's politicians and policy wonks do
nothing.
Since 1972, a series of court decisions have attacked rules, eroding
them to the point where rich people can move offshore for a couple of
years, move back again to use our health care and other services, and
still never pay taxes. Simple legislation would change this
immediately by adopting U.S.-style rules.
But dodging taxes is easy: The taxpayer pays a one-time 25% hit on his
wealth by declaring he is moving to a tax-free jurisdiction; he puts
the direct management of his money in the hands of financial
intermediaries or trustees. Canada Revenue Agency regards this as
arm's-length offshore trusts and, therefore, untaxable when
distributed, even back to Canada.
"It's easy to get out of taxes," said offshore expert and consultant
Alex Doulis. "A wealthy Canadian will leave and become a non-resident
for tax purposes, pay a 25% departure tax [on all his or her wealth
except for the value of his principal residence or Canadian-based
corporations] and never pay taxes again. They also have someone set up
a trust offshore and put capital into it so their children or
grandchildren can be sent distributions from the non-resident trust to
Canada tax-free in perpetuity."
In other words, Canada's tax loopholes actually encourage departures
because wealthy Canadians pay a one-time 25% taxation rate on their
RRSP, which, if they did not leave, would net 46% personal income tax
rates when withdrawn. The U.S. tax system does not allow such tax
dodges.
Even worse, wealthy Canadians can dodge taxes but also still live in
Canada up to 181 days a year. In other words, Canada Revenue Agency
lets them have their cake and eat it, too: Cold months in the sun,
warm months back home and all their money and investment profits tax-
free. And their offspring and other beneficiaries never have to move
offshore but can live completely tax-free in Canada on offshore trust
fund income and be entitled to use Canada's health care, education and
other services paid by taxpayers.
Canada also allows people to leave "permanently" for tax purposes,
then come back without penalty. That's why it is not unusual for old
expatriates, or those with serious illnesses, to return to poach off
Canadians for health care because they are medically uninsurable
abroad.
"Fortunately, for every one of these guys there are 10 of us who don't
do this," said Seymour Schulich. "My family's here, my grandchildren
are here and I made my money here. Say what you want, I think you owe
allegiance to the place which gave you the opportunities. I would say
to these guys who leave, 'It's okay to take your money and run, but
don't ever come back.' "
Anyone who leaves Canada as a tax resident should be allowed to rejoin
our health-care systems only if they pay a huge re-entry fee,
equivalent to the taxes saved while abroad. That's what private clubs
do when you take a leave of absence. Canada should do that, too.
That's just for starters. Next week I will write about another issue
of tax leakage and unfair entitlements that Ottawa ignores or is
ignorant of.
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Alan Baggett
Canuck57
Alan,
It is worse than that. They can live in Canada all year around like Paul
Martin did. Even be the PM while you do it and get health care. When Paul
Martian last adjusted the rules he made sure he didn't cut into his tax
loophole. Just setup and offshore corporation, put the money in there.
Until it is paid out, no reason to even declare it to the CCRA as no income
or gains are realized until it is paid out or dissolved. Wish I had enough
cash to justify the expense.
On top of that, the corporation, under guidance of the Canadian resident,
can invest in Canada and get the 25% tax rate on dividends that is
favourable. Sure beats the pain of personal rates that can be 40% or
higher. Plus the business can get investment credits.
Ottawa ignores it as the plutocracy that funds the parties we have
contribute generously to keep these holes open.
For more on this:
http://paulmartintime.ca/mediacoverage/000139.html
"Alan Baggett" <canada.rev...@hotmail.com> wrote in message
news:f6ad8615-f192-41dd...@c19g2000prf.googlegroups.com...
Alan Baggett
> Alan,
>
> It is worse than that. They can live in Canada all year around like Paul
> Martin did. Even be the PM while you do it and get health care. When Paul
> Martian last adjusted the rules he made sure he didn't cut into his tax
> loophole. Just setup and offshore corporation, put the money in there.
> Until it is paid out, no reason to even declare it to the CCRA as no income
> or gains are realized until it is paid out or dissolved. Wish I had enough
> cash to justify the expense.
>
> On top of that, the corporation, under guidance of the Canadian resident,
> can invest in Canada and get the 25% tax rate on dividends that is
> favourable. Sure beats the pain of personal rates that can be 40% or
> higher. Plus the business can get investment credits.
>
> Ottawa ignores it as the plutocracy that funds the parties we have
> contribute generously to keep these holes open.
>
> For more on this:
>
> http://paulmartintime.ca/mediacoverage/000139.html
>
>
> > -----------------------------------------------------------------------------------------------------
> > Miss a Tax Tale Miss a lot!
> > Follow the link to the new Canada Revenue Agency Story Of The Week
> > index!
> > -------------------------------------------------------------------------------------------------------
> >Alan Baggett- Hide quoted text -
>
> - Show quoted text -
Strange isn't it how tax 'loopholes' for the wealthy never seem to
close while those for the middle class get shot down almost as soon as
they become publicized.
Canuck57
"Alan Baggett" <canada.rev...@yahoo.com> wrote in message
news:089cb32c-1604-49cc...@q24g2000prf.googlegroups.com...
The whole idea of the modern tax system is to support ever increasing
government size. On this I am sure we agree. At some point, hopefully
people will realize it as it robs wealth from the workers for the
plutocracy.
The idea is to keep the worker class just making enough to motivate, but no
more. Get a little extra cash and uncle Pierre/Ottawa will find a way to
claw it back. Interesting how this perception is so well managed too.
For example, give people a government cheque, and they then support the big
government. People do not view the $$$$$$ they pay in taxes for a crummy
$100 tax deduction of their own money. This gets people to rally for a
government cause like sheep. This I call the Pied Piper effect and believe
the government actively does this.
Another one I like is the misdirection of gasoline costs. The reality is:
$2.50 gross earned income
-1.00 income, EI, CPP taxes
-0.20 costs of going to work
-------------
$1.30 gross profit
$1.30 for a litre of gasoline
-0.65 for government royalties, taxes, GST, PST etc.
-------
$0.65 actual product cost
So in effect, you need to earn $2.50 to buy a 65 cent litre of gasoline.
Government gross profit is $1.65 per litre. Yet people complain because a
company gets a few cents profit. And CBC will drum up the news if the
profit goes up a cent or two for the oil companies. Could be the CBC wants
to be sure their billion dollar plus subsidy comes through. It is also why
Ottawa owns and controls the media.
For that tax, how many know how the government actually spends it? I bet
few do. This might help even though it is from the devils mouth. Click on
the like then play with the audio on. Next for each subsequent slice.
http://www.fin.gc.ca/taxdollar07/mm/taxdollars0607_e.html
We pay more taxes than we realize and it does not all go where we think it
does.
We are well managed naive sheep.
4newsgroups
"Canuck57" <dave-n...@unixhome.net> wrote in message
news:vYkVj.130326$Cj7.48465@pd7urf2no...
baaaaaaah
Canuck57
"4newsgroups" <4news...@mts.net> wrote in message
news:p1lVj.72964$y05....@newsfe22.lga...
Guess you are one of the people content in being stupid.
4news...@mts.net
Not when you click on the next button :~)
> Guess you are one of the people content in being stupid.
Not at all. I find it much more productive to spend my time and effort on
ways of reducing my own tax burden. I don't spend my time and energy
crowing about how I pay excessive taxes.
Canuck57
4news...@mts.net
Well then you must be blessed with a lot more time then I have.