Only 9% of the Canadians who filed tax returns in 2011 made more than $100,000, but they paid more than 50% of the total personal taxes collected, according to CRA’s Tax Statistics on Individuals for 2011
I didn't know Robert Napoli was running for political office until I read his article, “Retooling business tax system could reduce wealth inequality ” (Business in Vancouver issue 1318; February 3–9). Perhaps Napoli was just having his Jerry Maguire mission statement moment? Not sure if this is the case, but I disagree with the notion that increasing taxation of the wealthy will somehow alleviate financial inequality in Canada.
Any tax debate hits hot buttons across all demographics. I don’t want to hit those buttons, but there is clearly a misunderstanding of how much tax the wealthy already pay in Canada. The Canada Revenue Agency (CRA) and a recent PwC report on the total tax contribution from Canadian companies support my belief that our tax rates are already high enough and that increased taxation is not the proper course of action for social relief.
Surprisingly, only 9% of the Canadians who filed tax returns in 2011 made more than $100,000, but they paid more than 50% of the total personal taxes collected, according to CRA’s Tax Statistics on Individuals for 2011.
There are more than a million taxpaying employer businesses in Canada that contribute over $35 billion of federal corporate income tax revenue. This is only one form of taxation that these corporate entities contribute. PwC estimates that for every dollar of corporate income tax paid there is an additional $0.94 of other business taxes and $0.59 of other payments to government for a total tax rate of 33.4%.
The Canadian tax system might be complicated, but it is fair and provides economic incentive for investment and growth. The lower tax rate on capital gains provides incentive for Canadians and foreigners to invest in Canada – stocks, real estate, bonds, guaranteed investment certificates and other business ventures. These types of investments fuel our economy, which in turn fuels jobs and job creation in Canada. It also encourages Canadians to save and plan for their own retirement.
There are very few entrepreneurs who have succeeded in building a business that can be sold. There are no public statistics, but I would bet that fewer than 1% of all business owners ever get to use the government’s lifetime capital gains exemption. For those who do, it’s usually after a lifetime of work. The major benefit of a business getting properly sold is that the business continues to operate, employing people, buying goods and paying taxes (payroll, GST, PST and income taxes).
Is there abuse in our corporate tax system? Most certainly. There are thousands of Canadians who do not fully report cash earnings or who unethically claim social benefits. There will always be cheats and those who abuse the generosity of the Canadian social systems and benefits.
But, overall, the tax system already carries a significant burden for the wealthy and for corporations. The real focus should be on how to efficiently distribute and spend those taxes. •
Mike McIsaac ([email protected]) is president of the mergers and acquisitions division at Renaissance Group Chartered Accountants in Vancouver.
