April 2005 Archives

CTF Commentary: Reforms to protect taxpayers

Après Gomery: Reforms to Protect Tax Dollars

Voters are looking to punish the Liberal party for wasting hundreds of millions of tax dollars and breaking their trust. In the past, whenever a scandal erupted in Ottawa – over say HRDC misplacing $1-billion or the cost of the gun registry jumping from $2-million to well over $1-billion – Liberals could claim they were acting in the best interest of all Canadians although mistakes were made. This will not wash with Adscam and the party might well be drummed from office – and rightly so.

But if voters opt for a change in government, Canadians have few guarantees the next bunch of rascals will behave any better. And if the Grits manage to hang on – with New Democratic Party support – malfeasance will likely continue under the existing system.

Canada’s Parliament is in need of an overhaul. A long string of spending scandals and audits reveal there is a systemic lack of accountability. Taxpayers are too familiar with the headline-grabbing stories of financial irregularities reported by Canada’s auditor-general. But other inspections are no less damning. A December 2004 audit of Canada Revenue Agency, reported by Canadian Press, revealed a casual attitude towards protecting taxpayers and their tax data. Most alarming are four computers stolen in 2003 from a tax office, which contain information on 120,000 Canadians, including their social insurance numbers.

Canadians need a permanent system – beyond ejecting one party from office for another – to ensure greater oversight of lawmakers. Allowing more free votes, vetting major appointments to heads of Crown corporations and agencies is a start, but additional reforms are necessary.

A good start is to hand the auditor-general greater oversight powers. Crown corporations as well as the foundations tasked with spending $9-billion of tax money cannot be inspected by the auditor or even our parliamentarians. At least $7-billion is sitting in foundation bank accounts, yet no one in the Government of Canada can access the funds or review how it is spent. Likewise, Parliament must pass a whistleblower law to protect civil servants who reveal government waste or corruption from retribution by senior officials.

The many shortcomings of Ottawa’s Access to Information laws must be strengthened to include a large swath of government activity currently exempt from scrutiny. Canada’s freedom of information laws were introduced in 1985 and designed to ensure the government is open and transparent. They are the citizens’ tools to enquire how tax money is being spent. Yet this principle is being eroded as information requests are routinely rejected. Bombardier has received $772-million since 1982 in direct government aid, yet Ottawa refuses to report the aerospace company’s repayment record. So-called third party exemptions have placed 15 billion tax dollars beyond taxpayers’ prying eyes.

Another route to end the log rolling relationship between politicians and industry is to stop the practice of subsidizing companies. “No More Boondoggles” legislation will end corporate welfare and ensure politicians focus on fostering a sound economy, and not pick economic winners and losers with handouts.

It is absurd that of Canada’s 413 federal lawmakers – 105 Senate seats and 308 seats in the House of Commons – fully 25% are appointed, not elected. The Red Chamber must be reformed in a manner that gives Canadians, and not politicians, the power through direct elections to decide who will write and pass laws. Failing this, the Senate should be abolished. Recall and citizen initiated-referenda are similarly needed, as are changes to the voting system that ensure 39% of the vote does not translate into a majority government with 100% of the power.

These reforms will not stamp out government corruption, but they will improve the political system. Stronger taxpayer protection laws are an internal watchdog on politicians and bureaucrats who are tempted to believe they can spend tax money any way they wish.

John Williamson
Canadian Taxpayers Federation
www.taxpayer.com

PEI: $120 Million for Island Infrastructure

A Government of PEI news release has reported that $120 million will be invested in improving its approach to managing infrastructure.

"Minister of the Atlantic Canada Opportunities Agency, Joe McGuire, and Shawn Murphy, Parliamentary Secretary to the Minister of Fisheries and Oceans, together with Premier Pat Binns and Elmer MacFadyen, Minister of Community and Cultural Affairs, today announced a five-year infrastructure governance framework that will ensure a focused approach to the management of three infrastructure funds on Prince Edward Island."

For more information, see the April 27, 2005 news release at:
http://www.gov.pe.ca/index.php3?number=news&lang=E&newsnumber=4084

Quebec Budget 2005-06

On Thursday April 21, 2005, the Government of Quebec tabled its 2005-06 budget. While ignoring the Liberal's pre-election promise of tax cuts, the government has attempted to provide "A budget of disciplined, responsible management for economic prosperity and social justice" as its press release indicates.

The budget proposes a modest spending increase. As identified in the press release, the three main objectives of the budget are:
- staying the course on priorities: health, education, culture, family, a lighter tax burden for Quebecers and the fight against poverty;
- encouraging wealth creation to ensure, in the long term, the maintenance and development of services for the population in all regions of Québec;
- modernizing public infrastructures.

$826 million has been earmarked for injection into health services,$321 for more in education towards academic achievement and $900 million over three years for regional development.

While personal income tax reductions were proposed in the budget, the personal tax imbalance between Quebec and other provinces remains high.

For more information, you can view the press release at:
http://www.budget.finances.gouv.qc.ca/budget/2005-2006/en/Discours/compres01.asp

The full text of the budget can be found at:
http://www.budget.finances.gouv.qc.ca/budget/2005-2006/index_en.asp

Farmer ID & Retail Sales Tax Exemption

The Government of Ontario has release information regarding the use of a Farmer ID Card to Claim an Exemption from Retail Sales Tax.

"This notice explains how farmers may, effective April 1, 2005, use a Farmer Identification (ID) card issued by a general farm organization (GFO) in lieu of a Purchase Exemption Certificate (PEC) to make eligible purchases exempt from Retail Sales Tax (RST)."

For more information, see:
http://www.trd.fin.gov.on.ca/userfiles/HTML/cma_3_41514_1.html

Alberta Tax Notes Newsletter

Recently the Government of Alberta launched the first edition of a new electronic newsletter, Tax Notes, to provide information about Alberta tax programs, changes to legislation and policies, tax filing support, and related provincial tax information.

Included in the first edition released on March 31, 2005, is information concerning Alberta-specific issues in the calculation of taxable income, a clarification of penalty/interest waivers, and a progress report on the initiative to simplify the Tax Exempt Fuel User program.

Those interested in the publication can subscribe to have editions delivered to their email inbox or view the the publication on the Alberta Finance web site.

For more information or to subscribe, see:
http://www.finance.gov.ab.ca/tax_notes/index.asp

Filing Deadline: Time is running out...

The deadline for filing your taxes and remitting amounts owed on your personal taxes without penalty is quickly approaching. However, did you know you have a bit more time this year?

Since April 30 falls on a Saturday in 2005, you have until midnight on May 2, 2005 to file (paper or electronically) your 2004 income tax return. By sending CRA your tax return on time, if you have a balance owing you will avoid being charged a late filing penalty.

For more information on filing your personal tax return, see the Canada Revenue Agency site at:
http://www.cra.gc.ca/individuals

Digital Animation or Visual Effects Tax Credit - Update

The Government of British Columbia has updated its bulletin on the Digital Animation or Visual Effects Tax Credit (April 2005), providing more detailed guidance with respect to the legislation.

Bill 7, Income Tax Amendment Act, 2003 amended the Income Tax Act to provide the legislative framework for the Digital Animation or Visual Effects (DAVE) tax credit.

"The DAVE tax credit program provides refundable tax credits on a corporation’s digital animation or visual effects activities that qualify for either the basic Film and Television tax credit or the Production Services tax credit. These credits are claimed when filing the T2 Corporation Income Tax Return, and are refundable to the extent they exceed the corporation’s income tax payable."

For more information, see:
http://www.rev.gov.bc.ca/itb/Bulletins/cit_011.pdf

CRA Tax Tip: Paying Electronically

Did you know that you can pay your personal or business income tax through most Canadian financial institutions, including electronically through their telephone and Internet banking services?

Depending on the services provided by the financial institution, you may even be able to schedule post-dated payments. Your financial institution may also provide information as to how to file your GST/HST return or remit any balance owing through the Canada Revenue Agency's GST/HST-EDI service.

For more information, see the CRA Tax Tip at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2005/0412ottawa-e.html

Kyoto Cost Rises 100 Per Cent in Seven Weeks

Ottawa – The Canadian Taxpayers Federation (CTF) reacted to the release of Ottawa’s Kyoto Protocol implementation plan. The federal government today pegged the seven-year cost to meet Canada’s Kyoto targets at $10-billion. When the federal budget was tabled – only seven weeks ago – the government unveiled a five-year plan that would cost $5-billion.

"The release of this plan is long overdue and because of Ottawa’s inability to manage this file, implementing the Kyoto agreement is going to cost Canadian taxpayers significantly more," said CTF federal director John Williamson. "The environment minister today admitted the only way to meet Kyoto targets is to subsidize business and buy ‘hot air’ from Russia. In other words, we will pay Russians so we may heat our homes in the dead of winter. Ottawa obviously has too much of our tax money to spend if it can propose and enact such harebrained policies."

The international treaty, which came into effect on February 16, requires Canada to reduce average carbon dioxide emissions to 6 per cent below 1990 levels by 2008-12, but because the country’s output of greenhouse gases has increased by some 30 per cent since 1990 dramatic cuts in energy output are needed in short order. The federal government ratified the Kyoto agreement in 2002.

"Canada will need deeper cuts, over a shorter period of time, and this will have a negative impact on the economy," noted Williamson. "Ottawa will spend billions of dollars, increase the cost to businesses and slow the economy, which will mean lower wages and reduced family incomes. And despite the high cost, Canada will still not meet its targets to reduce greenhouse gas emissions."

The CTF recently updated projections on the cost to Canadian families to implement the Kyoto Protocol to $3,000 per household – per year – by 2010. The update is based on its November, 2002, study Counting the Costs: The Effects of the Federal Kyoto Strategy on Canadian Households. The original report predicted the price increases and wage reductions needed to bring energy consumption down to Kyoto levels would reduce annual real net household income by $2,700.

"The more Canadians learn about Kyoto the less they like it. Particularly when it will mean making drastic changes to our way of life without a corresponding reduction in global emissions or an improvement in our quality of life here at home," concluded Williamson.

John Williamson
Federal Director
Canadian Taxpayers Federation
www.taxpayer.com

Ontario Small Business Guide

The Government of Ontario has announced an updated Small Business Guide which will guide you through various aspects of Retail Sales Tax, Corporations Tax, and Employer Health Tax.

Information about this guide is available at:
http://www.trd.fin.gov.on.ca/userfiles/HTML/cma_3_24414_1.html

Manitoba Tax Changes

Taxation changes were announced by Manitoba Finance Minister Greg Selinger in his Budget Address on March 8, 2005. Included in these changes are:

- adjustments in the personal income tax brackets;
- information on the Community Enterprise Development Tax Credit which encourages Manitobans to invest in their communities and provides community-based enterprises with the means to raise necessary equity capital;
- information on the Manitoba Equity Tax Credit which assists in the development of capital markets in Manitoba and encourages Manitobans to invest in Manitoba companies; and
- an increase in the Political Contribution Tax Credit

For more information, see:
http://www.gov.mb.ca/finance/taxation/bulletins/currentbudgetchanges.pdf

Update BC tax bulletins

The Ministry of Provincial Revenue has amended information bulletins on several tax topics:

Bulletin IPT 003 Insurance Premium Tax Act Amendments (February 2005) has been amended to include information introduced in Budget 2005.

Bulletin CCT 013 Corporation Capital Tax Act Amendments 1994 - 2005 has been amended to include information introduced in Budget 2005.

For more information, please see:
http://www.rev.gov.bc.ca/itb/WhatNew/bulletins_updated_Budget2005.htm

Changes to income tax in B.C.

On March 3, 2005 in British Columbia, Bill 7, Income Tax Amendment Act, 2005 received royal assent. Specific changes relate to the BC tax reduction credit, BC Business Limit, the Film and Television Tax Credit and the Production Services Tax Credit.

Changes include an increased to the BC business limit:

Effective January 1, 2005, the British Columbia business limit to which the British Columbia small business rate of corporate income tax may be applied is increased from $300,000 to $400,000.

Corporations should also review the corporate straddle provisions:

A corporation with a taxation year that starts before January 1, 2005 and ends after December 31, 2004 will be required to prorate its British Columbia business limit of $400,000, based on the number of days in the taxation year after December 31, 2004. The business limit of $300,000 must be prorated based on the number of days in the taxation year prior to January 1, 2005.

For more information on the BC Business Limit, please see the Bulletin at:
http://www.rev.gov.bc.ca/itb/Bulletins/cit_002-SR.pdf

For changes to the British Columbia Film and Television Tax Credit, please refer to the Bulletin at:
http://www.rev.gov.bc.ca/itb/Bulletins/cit_009-SR1.pdf

For more information on the British Columbia Production Services
Tax Credit, please refer to the Bulletin at:
http://www.rev.gov.bc.ca/itb/Bulletins/cit_010-SR1.pdf