January 2007 Archives

Revenue Agency supports innovative approach to educating charities

The Canada Revenue Agency recently issued a news release announcing the implementation of a new contribution agreement, signed by the Canada Revenue Agency and Carleton University’s Centre for Voluntary Sector Research and Development.

According to the CRA web site, under the contribution agreement the Centre for Voluntary Sector Research and Development will deliver training programs to assist other charities in meeting their tax obligations.

"This is the second contribution agreement signed under the Canada Revenue Agency’s Charities Partnership and Outreach Program, which supports compliance-related education and training projects for charities. The contribution agreement will provide $1.35M in funding over three years."

For more information on this news release and how the federal government is working with the voluntary sector to improve the regulation of the charitable sector, please view the full text of the news release online or view the CRA’s Web site at http://www.cra.gc.ca/charities.

CRA Tax Tip: Claiming medical expenses

The Canada Revenue Agency (CRA) has issued a Tax Tip on claiming medical expenses on your 2006 tax return:

Did you know that you can claim, as a non-refundable tax credit, medical expenses for yourself, your spouse or common-law partner, and your children born in 1989 or later? For 2006, the total expenses have to be more than 3% of your net income, or $1,884, whichever is less.

For more information on claiming medical expenses on your taxes, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070125-e.html

CRA Tax Tip: If you're 65 or older...

The Canada Revenue Agency (CRA) has released the following Tax Tip:
"Did you know… That as of January 1, 2006, the age amount maximum increased from $4,066 to $5,066? If you were 65 or older on December 31, 2006, and your net income was less than $64,043, you can claim the age amount. You may also be able to transfer unused portions of the age amount to your spouse or common-law partner."

For more information regarding Canadian tax filing tips for seniors 65 and old, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070122-e.html

Canada Child Tax Benefit Payments

January 2007 Canada Child Tax Benefit payments information is now available on the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2007/jan/nr070119-e.html

CRA Tax tip: Take it to the limit!

The Canada Revenue Agency is reminding all eligible Canadians that March 1, 2007 is the deadline for making a contribution to a registered retirement savings plan (RRSP) for the 2006 tax year. For more information on this tax tip, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2007/tt070115-e.html

On the Dole: Businesses, Lobbyists, and Industry Canada’s Subsidy Programs

Corporate Welfare Continues to Fleece Taxpayers

- $18.4-billion in handouts given to businesses in 47,960 payments over 23 years.

- Only $1.25-billion or less than 7% has been repaid to federal government.

- By ending the subsidy game Ottawa could reduce business tax burden.

OTTAWA – The Canadian Taxpayers Federation (CTF) today released a report, entitled On the Dole: Businesses, Lobbyists, and Industry Canada’s Subsidy Programs, that details $18.4-billion in federal government handouts to businesses, associations and foundations for the period covering April 1, 1982, to March 31, 2006. It examines only tax money authorized through the federal industry department. It does not include subsidies from other departments, the three primary federal regional development agencies (Atlantic Canada Opportunities Agency, Canada Economic Development – Quebec, and Western Economic Diversification) or similar programs funded by other levels of government. The information was compiled through freedom of information requests made to Industry Canada.

“Corporate welfare programs are a sinkhole for tax dollars. Handouts serve neither businesses nor taxpayers and should be scrapped. Since 1982, billions have been given away or loaned yet repayments are paltry and many of the top recipients have taken up permanent residence at the trough,” stated CTF federal director John Williamson. “High taxes fund subsidy programs that benefit a minority of companies. If the department of industry was overhauled Ottawa could cut its corporate tax cut rate by 2 or even 3 percentage points. Such a change would benefit all businesses, improve Canada’s international competitiveness and be advantageous to consumers, workers and investors.”

The 30-page report can be viewed at: http://www.taxpayer.com/pdf/2007_corporate_welfare_report.pdf

The 809-page subsidy appendix can be viewed at: http://www.taxpayer.com/pdf/subsidies.pdf

Findings from On the Dole: Businesses, Lobbyists, and Industry Canada’s Subsidy Programs:

- Between fiscal years 1982 and 2005, $18.4-billion of assistance was authorized through 47,960 separate grants, contributions, loans, interest contributions and loan guarantees from 150 different programs. Of the total, $7.1-billion is considered repayable funding yet only $1.25-billion or 17.6% of that amount has been repaid. All said, less than 7% of the total subsidy portfolio has been recouped by Ottawa;

- Technology Partnerships Canada (TPC), which is Ottawa’s flagship corporate welfare program, has authorized $3-billion since its inception in 1996 and recovered only $169-million. This is a repayment record of less than 6%. Taxpayers were originally told every TPC investment dollar would return $1.74 in repayments from businesses;

- The Top 50 subsidy recipients have received a third of all money authorized or $5.9-billion;

- The Top 3 recipients have secured $2.6-billion in federal handouts. They are Pratt & Whitney ($1.5-billion authorized plus another $350-milion announced in Dec. 2006 that is not included in this report), Bombardier ($745-million authorized plus another $350-million announced in Nov. 2006), and General Motors Canada ($360-million); and

- Industry Canada has 2,234 lobbyist registrations and is the most lobbied department in Ottawa.

Rule-Breaking & the Transparency Deficit –

One characteristic of the subsidy game is rule-bending and rule-breaking. Audits have revealed companies routinely paid forbidden “success fees” to lobbyists in exchange for securing subsidy handouts. In addition to paying prohibited fees, audits have found lobbyists have neglected to register, which is another violation of transparency and accountability rules.

Another concern to taxpayers is the lengths politicians and bureaucrats will go to avoid checks and balances when doling out tax dollars. A glaring example of this is the fact that nearly 10% of all authorized monies under TPC are just below the $10-million mark, the level at which Treasury Board approval is not required. “Without as many checks and balances, the money flows quicker, albeit by smaller amounts, and there is less scrutiny,” said Williamson. “This makes it easier for industry officials to funnel tax dollars from government coffers to recipients’ bank accounts.”

Moreover, politicians make multi-million dollar spending announcements without first receiving approval from the Treasury Board. “This is another example of how politicians use corporate welfare as a means to buy votes in advance of an election,” stated Mr. Williamson. “It should be outlawed.”

The Conservative Government & Corporate Welfare –

The Conservative government has sent mixed messages on corporate welfare since coming to office. “While progress has been made regarding releasing TPC repayment data, the government has breathed new life into TPC and continues to make new announcements,” stated Mr. Williamson.

In opposition, Stephen Harper criticized the practice of corporate welfare saying Ottawa should “get out of the grants and subsidies game.” In 2004, he vowed to cut business subsidies and use the savings to lower business taxes. “We will only reduce business and corporate taxes further to the extent that we can reduce corporate welfare over the next term,” he told the Toronto Board of Trade. Williamson noted, “This is the right policy. Business leaders should be forced to choose between lower taxes or subsidy programs.”

A Better Way, Lower Taxes for All –

A 2005 C.D. Howe Institute study ranked Canada a dismal 30th among 36 industrialized countries in terms of combined average federal-provincial corporate income tax rates. The report also found Canada had the second highest marginal tax rate on capital. The only higher-tax jurisdiction was communist China.

“By getting out of the subsidy and regional development business, Ottawa could reduce the corporate tax burden. Savings of $2- to $4-billion could be realized annually if Ottawa recognized that corporate welfare was not a suitable role for the government,” concluded Williamson. “Ottawa’s general corporate income tax burden, which is 21%, could be reduced by 2 or even 3 percentage points. This tax reduction will benefit all companies, our domestic economy, and improve Canada’s international competitiveness.”

John Williamson
Federal Director
Canadian Taxpayers Federation

CRA Alert: Don't get involved in illegal tax filing!

The Canada Revenue Agency has issued an alert to inform Canadians that if the refund sounds too good to be true, maybe it is!

"If you hear about a tax preparer offering larger refunds than other preparers, don't be fooled! While most preparers provide excellent service to tax filers, a few unscrupulous return preparers file false and fraudulent tax returns and ultimately defraud their clients.

Remember that even if someone else prepares your tax return, you're the one responsible for all the information on the return."

For more information on this alert, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a070109-e.html

Canadians to Pay Less, Thanks to Lower Income Tax Bite and GST Cut

Every year the Canadian Taxpayers Federation (CTF) releases projected income and payroll tax changes that kick in on January 1. The good news is that all taxpayers will pay less tax this year. A new employment tax credit – called the Canada Employment Credit – will increase to $1,000 for the 2007 tax year, up from $250 in 2006. This credit works like the basic personal exemption, which is set at $8,929 this year, and means workers will not pay income tax on the first $9,929 of earnings.

A fourfold increase in the Canada Employment Credit permits the Conservative government to truthfully assert taxes are going down even though Canadians will pay more payroll taxes and the lowest personal income tax rate, applied to the first $37,178 of income, will rise a quarter-point to 15.5% from 15.25%. This pleasant testimonial is only strengthened by the one-point GST reduction that will save consumers approximately $4.5-billion in ’07.

Some taxpayers will benefit much more than others. Ottawa will take less from the average individual taxpayer, but the amount is a pittance – 106 dollars to be exact. (See chart for federal income and payroll tax changes.) Low-income individuals, earning less than $25,000 annually, profit the most because they benefit from the employment credit and less income is subject to the 0.25% income tax rate increase.

Employment Insurance (EI) premium rates will drop by seven cents on January 1 to $1.80 for employees (per $100 of insurable earnings) from the current rate of $1.87. (The corresponding employer rate will drop by 10 cents to $2.52 from the current rate of $2.62.) Yet this gain is mostly offset because the tax rate will be applied to more income. Ottawa is giving tax relief with one hand and taking it back with the other. The maximum insurable earnings will rise from $39,000 to $40,000. This was not an inflationary boost as the previous EI threshold increase was in 1995. Ottawa was wrong to increase the EI threshold when the program continues to amass an annual $2-billion surplus. The seesaw EI changes represent a mere $9.30 reduction from 2006 levels.

Canada Pension Plan (CPP) payroll taxes will also rise by $79.20. While the tax rate will remain unchanged, the income threshold will increase to $43,700 from the 2006 level of $42,100. The bottom line is the net payroll tax bill on workers will increase by $69.90 (and $65.40 for employers) because EI tax reductions will be gobbled up by a higher EI threshold and rising CPP payments.

Children’s Fitness tax Credit

Information on the new children's fitness tax credit is now available on the Canada Revenue Agency website at www.cra.gc.ca/fitness.

According to a CRA news release:

"Following the report of a panel of health and physical fitness experts, Finance Minister Jim Flaherty announced on December 19, 2006 his intention to introduce regulatory changes that would clearly define eligible programs of physical activity for the purposes of the tax credit, which was initially proposed in the 2006 Federal Budget.

Parents are encouraged to ask for and keep all receipts when they register their children in 2007 for physical activity programs that may qualify. Information about how to claim the tax credit will be included in the General Income Tax and Benefit Guide – 2007."

The full text of the CRA news release can be found at:
http://www.cra-arc.gc.ca/newsroom/releases/2007/jan/nr070105b-e.html

New CRA publication – Making a Difference for Canadians 2006

The Canada Revenue Agency (CRA) has released a new publication called Making a Difference for Canadians 2006

According to the CRA news release:

"The report shows how the CRA contributes to the well-being of Canadians through the collection of revenue, the distribution of benefit payments, and the administration of tax credits and legislation for federal, provincial, territorial, and First Nations clients."

For more information see:
http://www.cra-arc.gc.ca/newsroom/releases/2007/jan/nr070104-e.html

CRA Alert: Don’t be fooled by unsolicited e-mails or phone calls!

The Canada Revenue Agency (CRA) is warning the public to beware of a number of scams in which individuals falsely identify themselves as officials from the CRA or the Department of Finance Canada. The scams are circulating by both e-mail and telephone.

According to the CRA website, "There are many versions of the scam, but the general concept remains the same: the victim receives an unsolicited phone call from an individual claiming to be a government official or an e-mail from a legitimate-sounding generic e-mail account that appears to come from a government organization." The individual asks the victim to send money in order to receive a lottery winning or tax refund.

The CRA reminds Canadians, "Do not, under any circumstances, respond to any unsolicited e-mail or telephone call asking you for money or confidential banking information. Instead, immediately contact your local police department or the Royal Canadian Mounted Police."

For more information on these e-mail and telephone scams, and for tips on avoiding being a victim of these scams, please see the CRA website at:
http://www.cra-arc.gc.ca/newsroom/alerts/2007/a070104-e.html