Kim Moody: The Legend of Sleepy Hole has nothing on these tales of insanity
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Boo!! Did I scare you? If not, sit again, take a sip of your favorite beverage and prepare for some spooky tax tales for Halloween.
Halloween has an fascinating historical past courting again a whole bunch of years. Income tax in Canada doesn’t have fairly the identical historical past — courting again to solely 1917 — however the first identified taxation passed off in historic Egypt round 3000–2800 BC. Technically, Halloween is a teenager in comparison with taxation.
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One in all my favorite Halloween tales is The Legend of Sleepy Hole. As a teenager, I recall being freaked out listening to deep-voiced narrators of the story on tv. I’m undecided why tax has not had the identical attraction for Hollywood writers and producers, however tax will also be very spooky.
Accordingly, within the spirit of the season, I current to you — in a deep voice — Sleepy Hole: The Canadian Tax Model, which incorporates a number of the nation’s spookiest tax scenes of latest years. Don’t get too frightened, however please be sure to learn these tales to your children or different younger ones tonight … it’s necessary they’re spooked, too.
The cry for the wealthy to pay extra: This spooky story retains being informed by lefties who really feel just like the so-called wealthy get all of the tax breaks. Fortunately, that has way back been debunked. It might be extra intellectually sincere for the individuals who inform this story to state that they need the wealthy to pay all the tax. Loopy, positive. However not less than the story wouldn’t be deceptive.
Scary actual property taxation measures: I’ve recited this spooky story many occasions, nevertheless it continues to get extra horrifying. From a ban on proudly owning residential real estate by foreigners, the underused housing tax geared toward foreigners, the foolish “flipping tax,” the ridiculous ban on deduction of bills for sure short-term rental house owners, a proposed emptiness tax and recently introduced measures to encourage owners to turn out to be landlords, the story simply will get evermore cluttered and complicated.
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None of those measures will assist our superhero authorities resolve our nation’s housing points, however they’ll actually hold making a multitude of it.
The disappearance of profitable Canadians: The story of profitable Canadians leaving this nation for higher financial and taxation situations has been ongoing for greater than seven years now. It’s not good and it must be stemmed sooner moderately than later.
The capital features inclusion price chunk: This tale has been informed for the reason that April 16, 2024, federal budget when the capital gains inclusion rate was hiked, and it has been a posh and scary one for positive. The doubtless ending of this story will lead to extra profitable Canadians leaving and fewer incentives for entrepreneurs and traders to danger their capital. Not good.
The taxman stumbles: The headcount of the Canada Income Company has grown by virtually 48 per cent previously 9 years whereas service requirements have dramatically decreased — by my anecdotal expertise. This must get higher.
The failing luxurious tax: This tax was launched in 2022 because the Select Luxury Items Tax Act to cost patrons of sure luxurious automobiles, boats and airplanes a further tax to the extent the worth of the merchandise was above sure thresholds.
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In its first yr of implementation, the federal government raised only $137 million (lower than budgeted) and incurred $19 million to manage the brand new tax. This spooky taxation story is solely political and pathetic.
Dangerous issues occur to good folks: This story began within the 2021 federal election as a political stunt and finally resulted in amendments to the Various Minimal Tax (AMT) that presumably goal the “wealthy.”
Such amendments, nonetheless, will find yourself harming charities since charitable donations by the “wealthy” — regardless of latest amendments to melt the affect — can set off the AMT, so it must be repealed.
Traditional tales are sometimes structured in a approach that gives for an exposition, rising motion after which a climax resulting in falling motion and a decision. This construction is named the Freytag Pyramid, named after the Nineteenth-century novelist Gustav Freytag.
It’s apparent that the Canadian tax model of Sleepy Hole is nicely past the exposition stage — the primary a part of Freytag’s Pyramid — because it began years earlier than. The rising motion has additionally continued for years with quite a few taxation insurance policies launched by our federal authorities which are so overtly political and devoid of fine taxation coverage, as illustrated above.
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The push in the direction of the climax began with the introduction of the capital features inclusion price improve within the 2024 federal price range. This has upset many individuals, who’ve since been pushing again.
We’ve but to see the climax completely reached for the reason that capital features proposals haven’t turn out to be legislation, and with the political uncertainty in Canada, it isn’t clear when or if these proposals will get handed. In the event that they do, the falling motion would be the time between then and the subsequent federal election.
The decision to this story will probably be a brand new authorities that’s dedicated to taxation reform, one thing that’s badly wanted in Canada, to assist enhance our nation’s dangerously low productiveness and to reward and encourage entrepreneurship and onerous work.
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Such a dedication will finish this model of Sleepy Hole and start one other taxation story. However this time, I’m assured it received’t be a spooky one. I’m optimistic that we’ll see a a lot happier story, not a Halloween story crammed with tips and no treats.
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Kim Moody, FCPA, FCA, TEP, is the founding father of Moodys Tax/Moodys Non-public Consumer, a former chair of the Canadian Tax Basis, former chair of the Society of Property Practitioners (Canada) and has held many different management positions within the Canadian tax group. He could be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.
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