September 2007 Archives

Will Ottawa Now Reduce Income Taxes?!?

· Structural over-taxation results in $14.2-billion surplus in 2006/07.

· Interest savings of $725-million go to future tax relief, but broad-based income tax reductions not on Conservative agenda.

OTTAWA: The Canadian Taxpayers Federation (CTF) reacted today to the announcement the federal government posted a $14.2-billion surplus in the 2006 fiscal year, considerably higher than its two earlier projections. The 2006 Budget (tabled in May, 2006) originally low-balled the surplus at $3.6-billion and the 2007 Budget (tabled March, 2007) increased that estimate to $9.2-billion. Ottawa missed its original target by almost 400% and its second estimate by more than 50%.

The surplus of $14.2-billion will be used to reduce Canada’s debt, bringing it down to $467.3-billion. Today’s debt reduction payment will save approximately $725-million in annual interest savings. Under the federal government’s new tax-back guarantee law the savings will be used to reduce personal income taxes. To date, the Conservative government has not lowered personal income tax rates, instead it has targeted income tax relief with a number of “boutique” tax reductions that favour some, but not all taxpayers.

“Canadians prefer that governments pass surplus budgets rather than deficit budgets, but this level of surplus is ridiculous. A $14.2-billion surplus means Ottawa is over-taxing Canadians by $14.2-billion. There is no excuse left, except political rhetoric, for Ottawa not to provide personal and business tax relief,” said CTF federal director John Williamson. “Annual surpluses represent over-taxation by government and the money should go back to taxpayers by way of income tax relief.”

For the Record – Surprise, Surprise:

Last year, when the Conservative government reported the 2005/06 surplus was $13.2-billion, Finance Minister Jim Flaherty said, “We’re going to budget much closer to the line … No more so-called surprise surpluses at the end of the fiscal year.”

“The government has shot its credibility on the surplus and is budgeting like the former Liberal government,” concluded Williamson. “The Conservatives downplay their ability to cut taxes, like the Liberals did. They sell massive surpluses as good news, just like the Liberals did. Canadians aren’t buying it any more and they recognize they are being gouged by Ottawa.”

Fiscal Outlook:

The CTF anticipates the surplus for the current fiscal year (2007/08) will again exceed $12-billion. The 2007 budget estimated it will be $3.3-billion.

John Williamson
Federal Director
Canadian Taxpayers Federation

$8.1 million GST scam involving businessman and phantom cars

According to a Canada Revenue Agency news release, a BC man was sentenced by the Supreme Court of British Columbia after being convicted on seven counts of Goods and Services Tax (GST) fraud and failure to remit GST. He was sentenced to two years less a day in prison and fined $6.9 million.

According to the CRA, an investigation found that as a Director an automative dealership, the man received or attempted to receive $8.1 million in GST refunds as part of an auto export scam. Over 1,600 brand new vehicles were claimed to have been purchased at cost plus GST from an unrelated company. According to the CRA, "the key to the scam was that the vehicles did not actually exist; the transactions were created on paper only."

The company would then “re-sell” the fictitious vehicles back to the other company without charging GST, claiming they were destined for export, filing GST returns requesting credits for the amount of GST paid for the purchase of the vehicles. These returns resulted in sizable refunds.

"When people or corporations are convicted of tax evasion, in addition to any fines imposed by the courts, they are still obligated to pay the full amount of federal and provincial taxes owing, plus interest and any civil penalties that may be assessed by the CRA."

For more information, please see the full news release at:
http://www.cra-arc.gc.ca/newsroom/releases/2007/august/nr070828-e.html