Federal Taxes Archives

CRA YouTube Contest Winners 2010

The winners of the Canada Revenue Agency (CRA) "The Underground Economy: Not Your Problem?" video contest on YouTube have been announced.

According to the CRA news release, the award for best English language video was given to David Hall, Steven Shanahan, Trevor Kai, and Shaun Axani from Toronto for their video called It could be you! The award for best French language video was given to Joele Cambon, Louis Blouin, Melany Parker, and Emilie Quevillon from Montreal for their video called Pour des choix éclairés.

"The winning videos deliver strong messages that clearly demonstrate the negative impacts of the underground economy," said Minister Ashfield. "I would like to personally thank everyone who participated in this video contest; the videos help reinforce the CRA's position on the underground economy and remind Canadians of the risks involved for individuals who participate in the underground economy."

The videos show that those who participate in the underground economy are avoiding their tax responsibilities at the expense of all Canadians. Participation in the underground economy places an unfair burden on law-abiding businesses and individuals and reduces the amount of money available for important government programs for priorities such as health care, education and the environment.

A CRA selection committee determined the winners based on video quality, creativity and how effectively the videos showed the impact of the underground economy on society. For more information, see the CRA web site at:
http://www.cra-arc.gc.ca/nwsrm/rlss/2010/m08/nr100806-eng.html?eml

2010 Tax Deadline

As we turn the pages of our calendars to the new year, and the new decade, another tax filing year is almost upon us.

Remember to check out our list of Important Dates and Deadlines for tax filing, including the Canadian 2010 Tax Filing Deadline and the 2010 RRSP Contribution Deadline (for the 2009 tax year).

Global tax information exchange peer review

Canada ready for review by Global Forum tax information exchange peers

The followiing news release is available from the Canada Revenue Agency:

Paris, France, January 7, 2010 ... Today, after a meeting with the director of the Centre for Tax Policy and Administration of the Organisation for Economic Co-operation and Development (OECD), Mr. Jeffrey Owens, the Honourable Jean-Pierre Blackburn, Minister of National Revenue and Minister of State (Agriculture and Agri-Food), announced that Canada has volunteered to be among the first countries to participate in a tax information exchange peer review process as part of the Global Forum on Transparency and Exchange of Information.

"Canada recognizes that the advancement of transparency and exchange of information is critical to tax fairness and the integrity of the tax system, not only for Canada, but for countries around the world," said Minister Blackburn. "Today, I confirmed Canada's continued commitment to the work of the OECD in the area of tax administration, in particular regarding the establishment of international standards for transparency and the effective exchange of information."

Under international treaties, Canada cooperates with a large number of countries by exchanging information about foreign investments for tax purposes. To this end, Canada is working hard to increase the flow of information by negotiating Tax Information Exchange Agreements (TIEAs). The work of Global Forum on Transparency and Exchange of Information and initiatives in Canada's 2007 Budget have created a strong incentive for jurisdictions to enter into these TIEAs.

The Global Forum has formed a Peer Review Group to ensure that TIEAs and exchange of information provisions in tax treaties are effectively implemented. The peer review process is expected to begin in the next few months.

"By taking a leadership role and volunteering to be among the first countries to undergo the peer review process, Canada will be in a strong position to fast-track the implementation of these agreements and build on the growing global momentum that currently exists," added Minister Blackburn.

As of October 2009, TIEA negotiations have commenced with 14 jurisdictions, in addition to the signing of Canada's first TIEA with Netherlands in respect of the Netherlands Antilles on August 29, 2009.

While in Europe, Minister Blackburn is holding a series of high-level working meetings with some of his tax administration counterparts from the Seven Country Working Group on Tax Havens to further advance co-operation between Canada and its international partners on addressing tax evasion and aggressive international tax planning schemes. Minister Blackburn's tour includes meetings with his tax administration counterparts in the United Kingdom, France and Germany.

Individuals and businesses can now pay their federal taxes online

The following news release is available on the Canada Revenue Agency web site:

The Honourable Jean-Pierre Blackburn, Minister of National Revenue and Minister of State (Agriculture and Agri-Food), announced the launch of a new online service at the Canada Revenue Agency (CRA).

"Taxpayers and businesses can now send payments to the Canada Revenue Agency instantly from their accounts at participating financial institutions using the new My Payment service," said Minister Blackburn. "This new service is yet another achievement aimed at reducing the paperwork and compliance burdens for Canadians."

The new My Payment service is safe and uses the existing security of your online banking services. It is also private—no sensitive tax or banking information will be shared between the CRA and a financial institution.

Minister Blackburn added that "My Payment ends the inconvenience of timing payments to arrive on the right day by mail by crediting CRA accounts at once for payment transfers. The service also ends the hassle of monitoring outstanding cheques to avoid non-sufficient-funds transactions, by only allowing payments when funds are immediately available from your account." This service will equally benefit businesses of all sizes and individual taxpayers.

My Payment is accessed using a portal on the CRA Web site. The service lets individuals and businesses send payments electronically through a secure link with Canadian financial institutions who offer Interac® Online payment service. Currently, those institutions include the following: BMO Bank of Montreal, Scotiabank, TD Canada Trust, and RBC Royal Bank. This new service will be available on October 5, 2009.

Transactions completed through My Payment can contain several payments for a combination of both individual and business accounts at the CRA. Payments can be made from a personal or a corporate bank account at a participating financial institution.

For more information on this or other CRA news releases, see:
http://www.cra-arc.gc.ca/nwsrm/rlss/2009/m10/nr091002-eng.html

YouTube Contest

According to a News Release on the Canada Revenue Agency web site, Minister Jean-Pierre Blackburn has invited Algonquin College students to speak up about the underground economy in a YouTube video contest.

In a meeting with Algonquin College students on February 12, 2009, the Minister of National Revenue invited students to discuss the negative impact of the underground economy and encouraged them (and all Canadians) to have their say through the national Underground Economy – Not your Problem? YouTube video contest.

“The government is committed to addressing the costs and risks associated with the underground economy and protecting Canada's tax base,” said Minister Blackburn. “Those who participate in the underground economy avoid their tax responsibilities at the expense of law-abiding individuals and businesses. They're taking away funds needed for the programs and services relied on by Canadians, especially at a time when we should all be working to build our economy together.”

For the full news release please see the CRA web site at:
http://www.cra-arc.gc.ca/nwsrm/rlss/2009/m02/nr090212-eng.html

Tax tip Seniors - your pension isn't the only benefit

The Canada Revenue Agency (CRA) offers a full range of tax-related services for Canadian seniors. In an online Tax Tip on the CRA web site, seniors can learn about tax benefits, non-refundable tax credits, electronic services, and payment methods.

Benefits
There are a number of tax measures that may be of interest to Canadian seniors. To receive the goods and services tax/harmonized sales tax (GST/HST) credit, you must apply by completing the application area on page 1 of your 2008 income tax and benefit return, even if you received the credit last year. For more information on the GST/HST credit, see Pamphlet RC4210, GST/HST Credit, or go to www.cra.gc.ca/benefits.

To split your eligible pension income between you and your spouse or common-law partner in order to reduce the amount of taxes that you owe, both of you should complete Form T1032, Joint Election to Split Pension Income. Be sure to keep the form in your records if you file electronically, or include it with your paper return.

For more information about tax benefits for seniors, go to www.cra.gc.ca/seniors for more detailed information.

SRED Tax Incentives - What's New

The Canada Revenue Agency has prepared a What's New page on its web site for information on the Scientific Research and Experimental Development (SR&ED) Tax Incentive Program Support for scientific Research and Development (R&D) in Canada.

The SR&ED program is a federal tax incentive program, administered by the Canada Revenue Agency (CRA), that encourages Canadian businesses of all sizes, and in all sectors to conduct research and development (R&D) in Canada. It is the largest single source of federal government support for industrial R&D.

The SR&ED program gives claimants cash refunds and/or tax credits for their expenditures on eligible R&D work done in Canada.

For information on what's new with the SRED program, please see:
http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html

CRA has denied over $2.5 billion in tax shelter gifting arrangement donations

According to the Canada Revenue Agency web site, despite numerous warnings and audit actions by the CRA, some taxpayers are still participating in tax shelter gifting schemes that are likely to result in reassessment and donation claims being outright denied.

"The CRA reminds taxpayers that tax shelter numbers are used for identification purposes only. A tax shelter with an identification number does not guarantee that taxpayers are entitled to receive the proposed tax benefits."

The CRA indicates that it plans to audit all tax shelter gifting arrangements and that to date well over $2.5 billion in claimed donations have been denied.

For more information, see:
http://www.cra-arc.gc.ca/nwsrm/lrts/2008/l081204-eng.html

John Williamson to leave Canadian Taxpayers Federation

The Canadian Taxpayers Federation (CTF) has announced that after six years with the organization John Williamson has stepped down as its federal director today and left the organization to pursue studies at the London School of Economics.

John served as the CTF’s representative and national spokesman in Ottawa since January 2004 and joined the taxpayers’ watchdog group in September 2002 as provincial director in Ontario.

Taxes.ca would like to thank Mr. Williamson for allowing us to reproduce the text of his articles and we wish him the best in his future endeavours.

Text of the media advisory is available at:
http://www.newswire.ca/en/releases/archive/September2008/12/c3429.html

Harper’s Challenge

We forget the tremendous progress Canada has made to its economic standing over the last 20 years. We were a high-taxed, heavily regulated nation and government had become too large, too bureaucratic and too wasteful. Our turnabout has been more dramatic than that of any of the G7 advanced industrial nations.

Canada began the 1970s with total government spending accounting for 36% of the country's economic output. The United States stood at 32.3% and the G7 average was 32.6%. Yet, the ravenous appetite of the state grew and grew, taxes increased and deficit spending became routine. By 1992, government activity in the U.S. accounted for 38.5% of all economic activity and 42% in the G7, increases of 19% and 29% respectively.

The growth of government in Canada meanwhile was even more stunning. Total government outlays at home devoured an astounding 53.3% of GDP. The state had grown by 48% and, rather than playing a helpful role in the economy, had instead become the problem. In 1992, Ottawa's deficit was $39-billion and one third of all federal tax revenues were spent on interest payments. The Wall Street Journal subsequently declared Canada an "honorary member of the Third World in the unmanageability of its debt problem" in an editorial entitled "Bankrupt Canada?"

Canada got serious about cutting government spending, selling Crown assets, eliminating deficits, limiting government involvement in the economy and eventually lowering taxes. By 2006, government's take of the economy was 39.5%, a decrease of 13.8 percentage points, and is now less than the G7 average of 40.4%. It is also only 3.1 percentage points higher than the size of the U.S. government relative to its economy, which today stands at 36.4%. Back in 1992, government in Canada was 14.8 percentage points larger than government in the U.S. (The spread between all government revenues remains higher at 6.2 percentage points because Canada is running surpluses and the U.S. funds spending with massive budget deficits.)

Government is still too big and consumes too many tax dollars. But the hard work is paying dividends as government has improved its balance sheet and loosened its grip on taxpayers, businesses and the economy. Today, unemployment is low, inflation contained, the dollar strong, and homeownership high. It has been an era of greater prosperity and opportunity.

At a campaign rally this week Prime Minister Stephen Harper told Canadians our country will remain a bastion of economy strength. This is true, provided Ottawa does its part and does not again muck-up the economy by growing and spending excessively. So where might be Canada going?

Taxpayers are already aware of the Liberal's proposal to lower income taxes on business and personal income but impose a carbon tax on traditional energy sources. Opposition leader Stéphane Dion calls his plan revenue neutral because "every dollar raised by the carbon tax will be returned to Canadians in tax cuts." But this is not accurate. A revenue-neutral tax plan matches a tax hike with a dollar for dollar reduction in other tax rates.

Mr. Dion will instead levy a $15-billion carbon tax on traditional energy sources. The revenue will be used to lower personal and business income taxes by $9.5-billion. Low-income families will receive payments totaling $4.5-billion and the remaining $1-billion spent on research and development. In other words, for every $2 in income tax relief there will be $3 in additional taxes and another $1 in spending. This plan will grow the size of government, drain more resources from the economy, and make middle-class families poorer.

So what about the governing party? Unlike the Grits, they have yet to release a platform. The Conservatives' first campaign promise was a small, but agreeable $600-million reduction to the federal tax on diesel. Whatever else they offer on the campaign trail many taxpayers will evaluate the Conservatives on their tax and spending record. That review is decisively mixed.

First the good news: taxes. The Conservative government got off to a rough start in 2006 by providing tax relief with a one point GST reduction but took much of it away by raising personal income taxes. A series of micro tax cuts in the 2006 and 2007 budgets – such as tax credits for regular transit riders or for tradesmen that purchased tools – benefited some, but certainly not all taxpayers. Then came the decision in October 2006 to reverse its guarantee not to tax income trusts. Although it was the correct policy prescription, it nonetheless hurt the government's standing among investors – anger that was somewhat dampened by allowing seniors to split pension income for tax purposes.

Finance Minister Jim Flaherty finally found the right track in the fall of 2007. His mini-budget eschewed boutique tax cuts and delivered significant broad-based tax relief. The GST was reduced along with business and personal income taxes.

Each one-point reduction leaves $6-billion in the hands of consumers. The Tories have chopped the hated tax by two points and transferred $12-billion a year to consumers, fulfilling a marquee campaign promise. The minister also reversed his income tax increase of 2006 by lowering the first tax bracket back to 15%. This was an acknowledgement from Mr. Flaherty that it was a mistake to raise this tax in the first place. The government reserved his boldest policy with a 32% cut to the corporate tax. The rate will tumble to 15% in 2012 down from 22.12% in 2007. The reduction will help Canada's competitive position and help ensure more good jobs are created here.

Finally, the 2008 budget included a novel tax-free savings plan. Beginning this January Canadians will be able to invest up to $5,000 of after-tax income each year. Future investment gains will not be subject to tax nor will earnings trigger clawbacks on government entitlement programs that are income-tested. This new tax-free savings account is pro-growth policy that will encourage Canadians to save, rewarding individuals and benefiting the entire economy.

Government spending, however, is another story. Voters were initially assured a Conservative government would be fiscally responsible. They have instead been reckless by embarking on a spending binge that hamstrings their ability to lower personal income taxes and reduce debt in the future. They have even managed to best Liberal Paul Martin's spending levels.

While in office, Mr. Martin grew Ottawa by 14% over two years. The first two Conservative budgets increased the size of the federal government by 14.8%. This makes the Conservatives even bigger spenders. While the 2008 budget promised to moderate spending growth to 3.4% this fiscal year, it seems bribing voters with their own money remains a higher calling. The department of finance reported last month that expenditure receipts swelled an eye-popping 8.4% in the first three months of the year. This is two-and-a-half times the 2008 budget plan.

Although they continue to claim they will hit their 3.4% expenditure target, the Conservatives have proven throughout their term in office that they cannot control spending. Consider the government's first budget. It called for Ottawa's expenditures to grow by 5.4% in fiscal 2006/07. At the end of that year government receipts had jumped by 7.5%. The 2007 budget plan announced an additional 5.6% spending hike. The real amount in 2007/08 was a 6.9% increase. So much for responsible budgeting.

Mr. Harper is likely going to win this election on the weakness of the opposition. Yet, the governing party is squandering an opportunity to further advance our position in the world. A lower taxed, better governed country than other G7 nations, including the U.S., would be a magnet for investment and skilled workers. For that to happen Ottawa will need to control expenditures and cut personal income taxes, which remain the highest of all G7 nations.

It remains to be seen whether Mr. Harper will be a transformative leader that keeps Canada out in front on the road to growth and prosperity or if he instead reverses course and ushers in a new era of big government. Canada's standing could easily fall.

If this seems preposterous consider how George W. Bush grew spending at twice the growth rate of his predecessor, blew the surplus and ballooned Washington's budget deficit. U.S. government spending has already increased by 59% this decade. That is an annual average of 8.4%. Over the same period Ottawa increased its expenditures by 54%. That is a yearly growth rate of 7.7%. If Mr. Bush’s fiscal diet consists of a supersized Big Mac, fries and a Coke, Canada is similarly gorging itself only downing it with a diet Coke. If Prime Minister Harper is to preserve our country’s fiscal advantage over G7 nations, he’ll need to trim spending the day after the election is over. Based on his record today, the likelihood of that happening is not promising.

John Williamson is federal director of the Canadian Taxpayers Federation. He will be leaving the watchdog organization today to undertake graduate studies at the London School of Economics.

John Williamson
Federal Director
Canadian Taxpayers Federation

Winning doesn't cost you!

In a news release on its web site, the Canada Revenue Agency reminds Canadians about scams involving sweepstakes and lotters. Winners of sweepstakes and lotteries in Canada DO NOT have to pay fees and taxes in order to claim their prizes.

"The CRA has issued warnings in the past about scams in which individuals are informed they have won a large sum of money in a lottery or sweepstakes, usually from a foreign country. The individual is usually contacted by a legitimate-sounding financial institution claiming that it has a bank draft from a foreign sweepstakes company that is payable to him or her. The individual is told that, in order to receive the prize, they must first pay part of the taxes allegedly owed on the prize amount."

According to the CRA, no taxes or fees of any kind have to be paid on lottery or sweepstakes winnings in Canada. "Any unsolicited email, letter or telephone call telling you otherwise is a scam", they warn.

For more information on this news release or further information on frauds and scams involving lotteries, sweepstakes, and related winnings, please see:
http://www.cra-arc.gc.ca/newsroom/releases/2008/mar/nr080319-e.html

Protect yourself against identity theft

As part of its involvement in Fraud Prevention Month, the Canada Revenue Agency has provided a news release encouraging Canadians to protect themselves against identity theft.

“The CRA considers the protection of taxpayer information our top priority” said Minister O'Connor. “March is Fraud Prevention Month in Canada. It is an important reminder that we all need to take precautions to protect our personal information, including keeping access codes private and choosing your tax preparer or other professionals carefully before sharing your confidential information.”

For more information on Fraud Prevention Month and the CRA's activities in protecting your information, visit the CRA web site and the related news release:
http://www.cra-arc.gc.ca/newsroom/releases/2008/mar/nr080303b-e.html

Income earned abroad is taxable

The Canada Revenue Agency (CRA) has provided a tax alert on its web site reminding Canadian taxpayers that they must report their worldwide income from all sources, both inside and outside Canada.

The tax alert warns Canadians about tax havens for the purpose of tax avoidance and evasion -- and the serious consequences for not reporting income.

Did you know that under Foreign property ownership reporting rules you have to report foreign property with a total cost of more than $100,000 CDN on your tax filing.

For more information on this tax alert, see:
http://www.cra-arc.gc.ca/newsroom/alerts/2008/a080228-e.html

A New Tax Savings Plan & Modest Spending Growth

Program spending budgeted to rise 3.4% in 2008/09, but hold the applause – spending has already increased by 14.8% under the Conservatives.

Gone is the promise to pay down debt by $3-billion a year.

OTTAWA: The Canadian Taxpayers Federation (CTF) reacts to the 2008/09 federal budget, which was tabled in the House of Commons by Finance Minister Jim Flaherty this afternoon.

The Tax-Free Savings Account – A Pro-Growth Tax Plan:

The Conservative government will allow Canadians to invest after-tax dollars and any investment gains from interest, dividends and capital gains will not be subject to tax. Moreover, savings will not trigger clawbacks on government entitlement programs that are income-tested, such as pension allowances and child tax benefits. Starting in 2009, Canadians will be permitted to contribute up to $5,000 a year to this new savings vehicle.

“The new tax-free savings account is a pro-growth policy that will encourage Canadians to save, reward individuals and benefit the economy,” said CTF federal director John Williamson. “This is an excellent policy proposal. Canada needs to reward people that save because their investments fuel economic growth and job creation. The big criticism of the GST cut was that it did little to encourage savings. Mr. Flaherty responded to this concern today by proposing a plan that will not punish people that save.”

Finance Minister Flaherty Hasn’t Controlled Spending So Far. Will He Tomorrow?

The budget proposes that program spending will increase to $208.1-billion in the next fiscal year, which is a modest 3.4 per cent rise. Unfortunately, the Conservatives have failed to control spending during their first two years in office. When the Liberals left office total program spending stood at $175-billion (2005/06 fiscal year). In fiscal 2007/08, the current year ending on March 31, the federal government’s annual outlays will – for the first time – break the 200-billion-dollar mark.

The Conservative government’s first budget called for Ottawa’s expenditures to grow by 5.4 per cent in fiscal 2006. Yet, at the end of that year government receipts had instead ballooned an astounding 7.5 per cent. The 2007 budget plan announced an additional 5.6 per cent spending hike. The real amount will be 6.85 per cent.

“Under Mr. Flaherty, the size of the federal government has grown by an astounding 14.8 per cent. How is this fiscally conservative or even ‘responsible,’” Williamson asked rhetorically. “As prime minister, Paul Martin grew the federal government by 14 per cent over two years. Amazingly, the Conservatives have bested Liberal spending. This is a spend-thrift government.”

“The government’s overall expenditure level is disappointing. Spending growth has repeatedly exceeded the minister’s own target, which is the economic growth rate. As a result, Canada will pay down less debt in the future,” said Williamson.

… Less Debt Repayment:

Minister Flaherty will reduce Canada’s $467.3-billion debt by $10.2-billion this fiscal year, which ends on March 31. The government plans to reduce the federal debt by only $2.3-billion next year (fiscal 2008/09) and a trivial $1.3-billion the following year (2009/10). Up until today, Mr. Flaherty had pledged to reduce debt by at least $3-billion each and every year.

“Ottawa needs a more aggressive debt reduction schedule. The Conservatives should not be downplaying the importance of paying off Canada’s debt,” said Williamson. “Debt servicing will chew up $31.5-billion next year, which amounts to $86-million each day. Ottawa should set yearly debt reduction targets, as was done with the deficit, and make those targets the law.”

A Little More Good News – Managing the Employment Insurance (EI) Surplus:

The 2008 budget will establish a Crown corporation to manage the EI fund. Future EI surpluses will be invested until needed for EI payments. At the same time, a new rate-setting mechanism will limit the surplus to $2-billion.

“Ottawa has been using the EI surplus as a cash cow and maintaining higher EI tax rates on workers than necessary. That’s an unnecessary tax on jobs,” noted Williamson. “It is hoped this new agency will reduce the unnecessarily large tax burden and large surpluses. It is unconscionable that Ottawa has accumulated massive EI surplus, tossed it all into general revenue and spent it. EI taxes should fund EI payments, not government largesse.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Jim Flaherty’s Budget Test

Jim Flaherty has done a good job downplaying expectations in advance of the federal budget, which will be tabled in Parliament on February 26th. The finance minister has said there will be no new expenditures nor will he deliver meaningful personal income tax relief. This might be acceptable so long as he delivers on both sides of the ledger.

Suppose Canadians give Mr. Flaherty the benefit of the doubt and accept that his hands are tied. That the economic downturn in the United States will reduce Ottawa’s tax base and the mighty surplus will evaporate. And perhaps many will agree a minority government makes it impossible for the Conservatives to cut government fat and eliminate waste. Maybe a status quo budget is sufficient.

Certainly, taxpayers can take some solace in recent tax cuts. The federal government rolled out a $60-billion package of broad-based tax cuts in October. It delivered substantial business tax relief, cut the GST to 5% and reversed the personal income tax rate increase Mr. Flaherty enacted in his first budget.

BUT … if Mr. Flaherty’s pledge to be fiscally “responsible” is to mean anything he must match his tax relief freeze with a corresponding spending freeze.

Increasing spending while shunning tax cuts will mean the Conservative government has put the interests of the bureaucracy ahead of ordinary taxpayers. And if the size of the federal government expands, Canadians are unlikely to buy the government line that taxpayers must wait for income tax relief.

Voters are hoping the finance minister finally follows through on his budget rhetoric. From the beginning of the Conservative government’s mandate Mr. Flaherty has vowed to control expenditures and spend responsibly. Taxpayers are still waiting.

When the Liberals left office total program spending stood at $175-billion (2005/06 fiscal year). The Conservative government’s first budget called for Ottawa’s spending to grow by 5.4% in fiscal 2006. Yet, at the end of that year government spending had instead ballooned an astounding 7.5%.

The 2007 budget plan announced an additional 5.6% spending hike. Once again spending has continued to creep upward throughout the year. Last month, the department of finance revealed expenditures had increased by 6.7% in the first eight months of the fiscal year (April to November). What fuelled the increase? The department says higher transfer payments, Crown corporation expenses, and operating expenses of departments and agencies. Translation: spending is up everywhere.

An example of lazy management is Ottawa’s recent $1-billion plan to retrain laid-off workers and fund community infrastructure projects. (More federal bocce ball courts and canoe museums anyone?) Rather than reallocate from non-priority spending, like handouts to special interests groups or corporate welfare subsidies, the government decided it was easier to reach into the coffers and drive federal spending to new heights.

Toss in end-of-fiscal-year “March madness” spending and the federal government’s annual outlays will – for the first time – break the 200-billion-dollar mark. How is this fiscally conservative or even “responsible?”

Mr. Flaherty is developing a reputation as being a big spending finance minister. Indeed, it is no contest between Mr. Flaherty and former finance minister Paul Martin over who is more fiscally responsible. It is Mr. Martin, by a long-shot.

Some might argue this comparison unjust since Mr. Martin tabled budgets in a majority government. As prime minister, Paul Martin was less “responsible” to be sure. During his two-year tenure he grew the size of government by 14%. And how much has government grown under Stephen Harper and his Conservatives in the same timeframe? It is – surprisingly – also 14%.

Looking ahead, Mr. Flaherty can continue mouthing empty rhetoric about controlling spending or he can start delivering. After two strikes it is hoped his third budget will finally deliver a dose of fiscal responsibility. If the Conservatives exercise even modest spending restraint they will be able to deliver meaningful personal income tax relief next year. The decisions Finance Minister Jim Flaherty makes in the upcoming budget will determine the size of tomorrow’s income tax cut. He should hold the line on spending, and taxpayers will thank him if he does.

John Williamson
Federal Director
Canadian Taxpayers Federation

Canadians say personal income taxes too high, too complicated and unfair – opinion poll

CTF public opinion poll also finds 45% of respondents believe cutting personal income taxes should be given priority over other tax measures

OTTAWA – The Canadian Taxpayers Federation (CTF) released results of a public opinion poll in advance of the 2008 budget, expected later this month. The poll was conducted by Praxicus Public Strategies Inc. for the CTF to determine what Canadians think of the personal income tax burden and gauge perceptions of the tax codes fairness and its complexity.

The CTF-commissioned public opinion survey found:

65% of Canadians say federal personal income tax rates are somewhat too high (33%) or much too high (32%);

63% of Canadians believe the federal income tax system is too complicated;

57% of Canadians deem the income tax system somewhat unfair (40%) or very unfair (17%);

45% of Canadians said income taxes should be the federal government's top tax cut priority with gas taxes second (18%) with payroll taxes and GST tied for third at 10% each; and

51% of Canadians prefer broad-based tax relief over 44% who like targeted tax measures.

The survey was conducted January 4 – 8, 2008, among 1,000 Canadian adults 18 years-of-age and older. The results are considered accurate to within +/-3.1 percentage points, 19 times out of 20. The results are available online: http://www.taxpayer.com/pdf/PollResults2008.pdf

On January 17th, the CTF released a groundbreaking study urging the federal government to enact a multi-year tax reform/relief plan. The report, entitled Lower, Simpler & Flatter – Towards a Single Tax Rate for Canada, urges Ottawa to reduce personal income taxes and cut the number of tax brackets from four to two while maintaining only a handful of deductions like RRSP, spousal and child allowances. The goal is to both simplify the tax code while lowering the personal income tax burden in a manner that strengthens the Canadian economy. The tax reform/tax relief news release is available here: http://www.taxpayer.com/main/news.php?news_id=2781

“This poll indicates our tax reform/tax relief proposal correctly identified problems with the existing personal income tax system. Specifically, a majority think income taxes are too high, the tax code is too complicated, and the system unfair,” said CTF federal director John Williamson. “The Conservative government should move to two federal income tax rates of 15% and 25% by 2012 as a way to make the system fairer and less complicated. There is public support for tax reform and tax relief.”

John Williamson
Federal Director
Canadian Taxpayers Federation

The Canada Revenue Agency offers business tax help on Saturdays

The Canada Revenue Agency (CRA) has issued a news release reminding Canadians that it will provide service on its business enquiries telephone lines on two Saturdays, February 16, and 23, 2008, from 10:00 a.m. to 4:00 p.m. The extended service is provided to assist employers who need help preparing T4 slips for employees.

"The CRA's business enquiry telephone service operates year round with agent-assisted service available from Monday to Friday between 8:15 a.m. and 8:00 p.m. Automated service is available 24 hours a day, 7 days a week.

The business enquiry telephone number is 1-800-959-5525.

The CRA takes the privacy and confidentiality of taxpayer information very seriously. When calling the business enquiry service, taxpayers are asked to answer personal and account-specific questions to confirm their authority to discuss the business account with the CRA. Taxpayer account information is available only to those individuals who have authorization to access the account.

For general information on business-related topics 24 hours a day, 7 days a week, visit the CRA Web site at www.cra.gc.ca."

Two federal income tax rates of 15% & 25%

- Slow Ottawa’s annual spending growth to 2.5% and it is possible by 2012
- A pro-growth plan that will deliver nearly $70-B in personal tax relief

Budget impact costed by the C.D. Howe Institute

OTTAWA – The Canadian Taxpayers Federation (CTF) today released a groundbreaking study urging the federal government to enact a multi-year tax reform/relief plan. The report calls on Ottawa to reduce personal income taxes and cut the number of tax brackets from four to two while maintaining only a handful of deductions like RRSP, spousal and child allowances. The goal is to both simplify the tax code while lowering the personal income tax burden in a manner that strengthens the Canadian economy. The report does not deal with corporate tax reform, nor does it redefine how investment income is taxed.

The study, entitled Lower, Simpler & Flatter – Towards a Single Tax Rate for Canada, authored by Mark Milke and John Williamson, argues the federal government should embark on comprehensive tax reform with the ambition of adopting a single personal tax rate. As an immediate first step, the authors recommend that Canada move to two federal income tax rates of 15% and 25% by 2012. There are currently four tax rates of 29%, 26%, 22% and 15%.

“Our immediate objective is to usher in two tax rates on personal income so no taxpayer will pay more tax and most will pay less,” CTF federal director John Williamson said today at a news conference on Parliament Hill. “The tax relief is substantial. If this two rate plan is implemented by the federal government it will mean a $25-billion annual personal income tax cut as of 2012.”

The C.D. Howe Institute conducted an independent analysis of this plan’s fiscal impact on government revenues and its affordability by 2012. The think tank also calculated the positive tax relief generated on households that result from adopting two income tax rates while eliminating many tax credits.

Finn Poschmann, the Institute’s director of research, concluded, “The tax relief proposed by the CTF is readily affordable by 2012, provided modest spending restraint is undertaken by the federal government … Restraining federal spending to 2.5% nominal growth per year, beginning in 2008, would produce planning surpluses of $21.9-billion and $28.1-billion [in fiscal 2011/12 and 2012/13]. This implies that personal tax relief of $25-billion per year is possible by 2012, while setting aside $3.0-billion annually for debt reduction and without running a fiscal deficit.” (The C.D. Howe’s Impact of Fiscal Measures is included in the report.)

“The decisions Finance Minister Jim Flaherty makes in the upcoming budget will determine the size of tomorrow’s income tax cut,” noted Williamson. “If the Conservatives exercise modest spending restraint they will finally be able to deliver meaningful personal income tax relief. We must not forget that Canada has the highest personal income tax burden of G7 nations, yes even higher than the French.”

Under the two rate model proposed by the CTF, by 2012:

Approximately 1.4 million low-income Canadians will be removed from the tax rolls as a result of all individuals earning $15,000 or less not paying any federal income tax. Income over $9,600 is currently subject to federal income tax under Ottawa’s existing tax system;

Every category of taxpayers – one-earner and two-earner households, married people with or without children, unattached singles with or without children, and seniors – representing 30 million Canadians, will pay less income tax or the same amount;

The basic and spousal exemptions are each $15,000 and there is also a per child exemption of $2,200. As such, two-parent families with two kids will not pay any federal income tax until their combined income exceeds $34,400. Today, this household is subject to tax on income at $23,200. A single parent with three children will pay no federal tax on the household’s first $21,600 of income. Federal tax is currently applied to this family’s income above $15,600;

To ensure low- and moderate-income senior citizens pay no additional income tax there is an age credit; and

RRSP deductions remain intact along with those for charitable giving.

“This tax relief is proportional. The more an individual or household earns the higher the tax savings will be. This is welcome because the middle class and high earners pay the majority of tax in Canada,” said Mr. Williamson. “Ottawa should stop punishing people for working hard.”

According to Statistics Canada, in 2002, the top 10% of taxpayers paid 52.6% of total federal income tax, up from 46% in 1990. Entrance to the “Elite 10% Club” began at $64,500 a year.

“The system also remains progressive as a result of generous personal and family exemptions. As a result, an individual’s or household’s share of taxes rises as more income is earned,” noted Williamson. “A common economic fallacy is that only tax systems with steep multi-tax rates are progressive when a single-rate tax with generous allowances can accomplish the same objective.”

Williamson concluded, “Lowering tax rates sends the important signal that entrepreneurialism, risk taking and hard work are positive endeavours to be encouraged. This is something Canada’s current income system with punitive tax rates fails to do. This two rate tax proposal is a pro-growth plan that will deliver nearly $70-billion in personal income tax relief over the next four years. It is based on prudent assumptions and is achievable without running budgetary deficits.”

An electronic copy of Lower, Simpler & Flatter – Towards a Single Tax Rate for Canada is available at: http://www.taxpayer.com/pdf/flat_tax_2008.pdf

John Williamson
Federal Director
Canadian Taxpayers Federation

Canada’s rich not contributing fair share in taxes: study

The Canadian Centre for Policy Alternatives (CCPA) has released a study Eroding Tax Fairness: Tax Incidence in Canada, 1990 to 2005 by CCPA-BC Senior Economist Marc Lee. According to the CCPA, the study is the first comprehensive review of tax changes at all levels of government in Canada within the past 15 years. It finds the system is delivering larger tax savings for high income families.

The news release for the study and the full study itself are available on the CCPA web site at www.policyalternatives.ca and www.growinggap.ca.

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

A Midterm Report Card (Part 2 of 2)

A Midterm Report Card (Part 2 of 2) Grading the Conservative Government - Taxpayers' Top 20 Policy Priorities
Part II

Shortly after the 2005/06 winter election campaign, the Canadian Taxpayers Federation (CTF) issued its Top 20 Policy Priorities for the new Conservative government. The agenda items united longstanding CTF policy prescriptions with Conservative Party campaign promises. Earlier this week the first 10 policies were ranked. The part one ranking is available by Clicking here.

11. Abolish Corporate Welfare
During the 2004 federal election, then-Opposition leader Stephen Harper criticized the general practice of corporate welfare saying it did not serve taxpayers. In a speech to the Toronto Board of Trade, Mr. Harper vowed to cut business subsidies and use the savings to lower business taxes. "I won't lower one without lowering the other. This is what I mean by low-tax solutions rather than high-spending solutions," he said.

Once in government, however, the Conservatives breathed new life into Technology Partnerships Canada (TPC) -- Ottawa's flagship corporate welfare program -- and continued to provide handouts to businesses, particularly in Quebec and Ontario. Recently, Industry Minister Maxime Bernier replaced TPC with the Strategic Aerospace & Defence Initiative (SADI). While this new program has a reduced budget (40 per cent less than TPC), and comes with stricter repayment and accountability conditions, it is still corporate welfare, which the CTF has continuously pointed out is failed 19th century industrial policy and a colossal waste of taxpayers' money.

Grade: D

12. Gas Tax Reform
Again in Opposition, Mr. Harper had plenty to say about high and unfair gas taxes. In August, 2005, he blasted the Liberal government for refusing to reduce gas taxes as prices soared. "There's no reason for the federal government to profiteer when consumers are hurting," he said, urging the former government to give motorists a break. Mr. Harper went further, suggesting the government "could knock the GST off of the excise tax. They could knock the GST off of gas above a certain price level."

In government only six month later, the Conservatives went into full retreat from pledges to cut gas taxes. The Prime Minister now says that high gas prices are here to stay and that paying them is something motorists will just have to "get used to."

Motorists have faired better on the Conservative commitment to spend gas tax revenues on roads and highway infrastructure. The government has dedicated 36 per cent of fuel tax revenue on roads bridges and highways, up from 7 per cent under the Liberals. This is a positive step and one the CTF welcomes.

Grade: C

13. Voting Reform - Establish a Citizens' Assembly on Voting Reform
This is not a Conservative government promise and there is no movement on the file. However, the electoral system chosen in the Conservative government's Senate reform bill is province-wide single transferable vote, which is a form of proportional representation.

Grade: C

14. End Party Subsidies
Repeal the federal government subsidy that pays political parties $1.75 per vote received in the last general election. Bring charitable tax credits for political parties in line with what is offered for other charitable organizations

On April 4, Elections Canada -- the agency responsible for overseeing federal elections -- released the 2007 first quarter subsidy payments made to Canadian political parties. Every political party that obtains 2 per cent of the national vote or at least 5 per cent of the vote in each riding it ran a candidate gets $1.75 per vote, each year. This amount is linked to inflation so the amount jumped to $1.8725 per vote for the most recent payment. It will be $2.00 this fiscal year, $2.14 in fiscal 2008 and rise again to $2.29 in 2009.

Meanwhile the political parties continue their independent fundraising activities. During the first three months of 2007, the governing Conservatives collected $5.2-million from its supporters. Do the Tories -- and opposition parties -- really need to be digging into the pockets of taxpayers?

Grade: F

15. Reform Foreign Aid
Whereas the Chrétien Liberals were prepared to engage in quiet diplomacy when dealing with China's abysmal human rights record, Prime Minister Harper has taken a different approach. "I think Canadians want us to promote our trade relations worldwide. We do that, but I don't think Canadians want us to sell out important Canadian values, our belief in democracy, freedom, human rights," he said last year. As such, the federal government has committed $1-billion to Afghanistan over 10 years.

Yet, according to the Canadian Coalition for Democracies, the government has not always directed Canada's foreign aid budget to promote democracy, the rule of law, press freedom, and responsible government. Indeed, China receives $54-million a year from Canadian taxpayers in aid. Other repressive governments also collect foreign aid dollars from Ottawa. Canada's total foreign aid budget is $4.1-billion this year.

Grade: C

16. Cut Employment Insurance Premiums
Ottawa's employment insurance program has amassed a $51-billion surplus thanks to ongoing over-taxation of workers and employers. Auditor-General Shelia Fraser noted in her 2004 annual report the federal government "has not observed the intent of the Employment Insurance Act." The auditor-general also criticized the fact that the EI surplus is automatically transferred to the government's general revenue because employee and employer premiums are supposed to cover benefits for the unemployed, not pay for other programs.

Conservative opposition MPs called the over-taxation "highway robbery" and a "raid" on the wallets of working Canadians. Their hypocrisy knows no bounds: the governing Conservatives are using the fund just like the Liberals, to pad the federal budget.

The government reduced the EI tax rate on January 1 for both employees and employers but it also raised the income threshold the tax is applied to. (It was the first increase in a decade.) In other words, the Conservatives gave tax relief with one hand and took most of it back with the other. The seesaw tax changes means the tax bite is only 1.3 per cent lower from 2006 levels.

Grade: D

17. Institute Recall and Referenda Initiatives
Not a Conservative government campaign priority.

Grade: F

18. Lower Taxes
Some progress in the 2006 Budget with the one-point GST cut and implementation of a new employment tax credit. The government also enacted an assortment of targeted tax relief measures that benefit some, but not all taxpayers. Disappointingly, the Conservatives also raised the bottom personal income tax rate by half a percentage point.

On March 19, 2007, Minister Flaherty stated during his second budget speech the taxes Canadians pay is excessive. "I hear it at the hockey arena, I hear it at the coffee shop, I hear it from people on the street, taxes in Canada are way too high," Mr. Flaherty told the House of Commons. Yet tax rates will not be reduced by the Conservative government.

The 2007 Budget failed to deliver the relief Mr. Flaherty had talked about, specifically tax relief for all Canadians. Instead, boutique tax relief was aimed primarily at senior couples, low-income earners, and families with kids. Missing was broad-based income tax relief and the next GST reduction will not happen until January 2011. Moreover, Canada's tax code is more complex and cumbersome thanks to the various targeted tax measures.

Grade: C

19. Control Spending
The Conservatives are quickly becoming "the Party of Big Spenders." The government's spending restraint melted away as the federal surplus ballooned. Last year, for example, Mr. Flaherty missed his original 2006 budget target of a 5.3 per cent spending increase. Instead it was 7.9 per cent, which is 50 per cent more! Had the Conservative government not embarked on its end of year spending, it is estimated the $9.2-billion surplus would have exceeded $14-billion. As excess money poured into Ottawa, the surplus was "spent down" instead of returned to taxpayers.

Federal government expenditures are rising dramatically. In the 2006 fiscal year -- the first year of Mr. Flaherty's watch -- spending ballooned by $13.8-billion, rising from $175.2-billion to $189.0-billion. This is the second biggest jump since the budget was balanced a decade ago. In other words, several Liberal budgets were more prudent than Mr. Flaherty's work. The outlook is not better this fiscal year with spending set to jump another $10.6-billion, levelling off at $199.6-billion.

The government's two-year binge will total $24.4-billion. That is a 14 per cent increase in the size of government!

Grade: D

20. Accountability and Transparency
The Harper government's biggest legislative accomplishment was enacting the Federal Accountability Act. The anti-corruption bill was signed into law in December 2006. The rules surrounding political party donations, lobbying, appointments, government contracts and advertising are now subject to clear rules and greater transparency. It represents a step forward although some elements are missing.

After the last election, the CTF detailed a "60 Point Accountability Report Card." It combined the 54 pledges from the Conservative Party's platform on accountability with 6 points from Judge John Gomery's recommendations stemming from the sponsorship scandal. Of the 60 points, the government included two thirds of them in its accountability law. The biggest disappointment was stripping the bill of access to information reforms. Access to information -- also called freedom of information -- is the taxpayers' best defence against abuse of tax dollars and secretive government. Other measures were truncated, for example the promise of a procurement officer is at the discretion of cabinet.

Overall the Federal Accountability Act is a step forward. It enforces new transparency laws, meets much of what the Conservatives campaigned on, and provides an accountability framework on which to build and improve.

Grade: B-

Conclusion
The CTF midterm is a snapshot evaluation and will be updated to reflect the Conservative government's improvements or regression. Improved grades might be achieved by limiting the federal spending power in areas of provincial jurisdiction, reducing corporate welfare or cutting gas and EI taxes. On the other hand, failure to reduce the national debt, cut taxes or enact reforms to make reserves more accountable to taxpayers and native band members will reduce the ranking.

Prime Minister Harper has made some progress, but he has also fallen short of his own stated objectives -- particularly on tax and spending policies. The Liberals are not ready for a return to government, but if the Conservatives opt to be "Liberal lite" voters will not be to blame for choosing the real thing. The CTF hopes Mr. Harper will instead return to Parliament in September with an invigorated taxpayer-friendly agenda.

A Midterm Report Card: Grading the Conservative Government - Part I

Taxpayers' Top 20 Policy Priorities
Part I

Shortly after the 2005/06 winter election campaign, the Canadian Taxpayers Federation (CTF) issued its Top 20 Policy Priorities for the new Conservative government. The agenda items culled longstanding CTF policy prescriptions with taxpayer-friendly promises made by the Conservative Party. Together, they represent a bold wish list to strengthen the Canadian economy, ensure tax dollars are spent more wisely, restore government accountability, and give Canadians a louder voice in Ottawa.

Taxpayers recognize Stephen Harper did not win a majority of seats in the House of Commons. Nonetheless, that does not mean the Conservative Party should abandon its agenda or reject good ideas not included in its election manifesto, such as reducing personal income taxes. As Opposition leader, Mr. Harper said he was a friend to taxpayers. But opposition parties do not write budgets or pass legislation. In office, Canadians expect Prime Minister Harper and his caucus to deliver much-needed reform to the federal government. So how are the Conservatives progressing so far? Here is the CTF evaluation of its first 10 policies priorities. (The next 10 will be released later this week.)

1. Limit Cabinet Size and Reform MP Benefits
Prime Minister Harper was applauded for limiting the size of his inaugural cabinet in February 2006 to 26 members. The Conservative's streamlined executive was down significantly from 37 under former Prime Minister Paul Martin and taxpayers were told the smaller cabinet would save $48-million over two years. However, on January 4, 2007, six secretaries of state were added to various ministries. Even though these junior ministers do not attend cabinet meetings, each is entitled to political staff and an office budget. Despite this setback, Mr. Harper has maintained a smaller cabinet and not overloaded the executive.

There has been no reform of parliamentary pay and pension benefits.

Grade: B-

2. Reform Appointment Process of Supreme Court Judges
Implement a multi-partisan Supreme Court nomination process and secure multi-party support when naming the heads of Crown corporations, agencies and other top government jobs

On February 27, 2006, the door of judicial accountability in Canada opened -- but just a crack. For the first time in history, a nominee for the country's Supreme Court had to face cameras and questions from an all-party Parliamentary committee. However, MPs were told the nominee, Justice Marshall Rothstein, could not be quizzed on any matter on which he might potentially render judgment. This ruled out questions of substance. The Prime Minister should allow greater latitude, and allow MPs to vote on the choice of nominee -- as members of his caucus requested.

Creating a new public appointments commission to provide more transparency in federal appointments was sidetracked after opposition MPs rejected Gwyn Morgan, the government's nominee. The former EnCana Corp. executive was not rebuffed because of his qualifications, but due to partisan mudslinging. The PM responded by shelving the commission, vowing to reintroduce it should he win a majority government.

The Conservative government made "substantially fewer patronage appointments" during their first year in office compared to the previous 12 months under Liberal rule, the Ottawa Citizen reported. The newspaper found between Feb. 2006 and Feb. 2007, the Conservatives appointed 410 people whereas the Liberals made 686 appointments in the same period the year before.

Grade: B

3. Enact a Legislated Debt Retirement Schedule
The Conservative government reduced the federal debt by $13.2-billion in the 2005/06 fiscal year. It anticipates an additional debt reduction payment of $9.2-billion in fiscal 2006. So far so good. Looking ahead, the 2007 Budget establishes an annual debt repayment of $3-billion in 2007 and 2008. Yet this is part of the budget framework and not set in legislation to guarantee debt repayment in future years.

Of particular interest to taxpayers is the budget's tax-back guarantee, which promises to reduce taxes using interest savings that occur naturally when government debt is reduced. Ottawa's debt stands at $472.3-billion and annual debt interest payments are more than $34.1-billion or $93-million each day. Should Ottawa make debt reduction a priority, the tax-back guarantee will be a boon to taxpayers.

Grade: C

4. Reform Fiscal Federalism
Ottawa is involved in too many areas of provincial responsibilities and the result is jurisdictional overlap that does not permit taxpayers to hold politicians accountable for how tax dollars are spent on health care and education. Who should voters hold responsible when medical patients sit in waiting lines rather than receive immediate care -- the provincial or federal government?

The Conservative government has opted to administer Canada's spaghetti federalism rather than untangle it. The 2007 Budget announced Ottawa will spend an additional $39-billion over the next seven years -- some of this amount will go to areas of federal responsibility and some to provincial areas. The payments to the provinces will be made through an enriched equalization and per capita education transfers. Ottawa will keep taxes high and continue to interfere in provincial affairs with the federal spending power.

Grade: F

5. Reform Federal Child Care
The Conservatives cancelled the daycare scheme that required parents to put their children in an institutional program. That program, developed by the Liberal government, provided no help to parents who raise their kids at home. It was replaced by a universal $1,200 child care allowance to permit parents -- not bureaucrats -- to choose what daycare option is best for their family.

Yet, the 2007 Budget revealed Ottawa will send $250-million per year to provinces and territories for government daycare spaces. In other words, the Conservatives revived the Liberal daycare program they had just cancelled! No wonder program spending has exploded under the Conservative government. Ottawa is funding two priorities -- the Conservative child care plan and the old Liberal daycare plan.

Grade: B-

6. Medicare Choice
Respect the Supreme Court of Canada's Chaoulli v. Quebec decision. Allow provinces to experiment with medicare delivery reform, including the use of private health care

Although the Conservatives are rhetorically committed to single-tier delivery, they earn marks for not ordering provinces, like Quebec and British Columbia, to close private health care facilities. (In contrast, the Liberal government routinely turned a blind eye to private medicine in Quebec but pounced on any other province that mixed private and public medicine.) This is an important development for reforming Canada's ailing government-run health system as well as treating provinces equally.

Grade: B

7. Aboriginal Policy Reform
One casualty of the government's Federal Accountability Act was the provision to permit the auditor-general to oversee tax dollars after they are transferred to native bands. Taxpayers currently provide $8-billion a year to reserves across Canada, yet there is no way to scrutinize how that money is spent. It was, however, opposition members who voted to remove this important reform from the bill.

Where the Conservative government can act independently it has, by scuttling the Liberal's Kelowna Accord -- the flawed deal to hand native groups an additional $5.1-billion over five years. It committed Ottawa to pour more money into a failed system, fund a growing bureaucracy and do little to improve the lives of ordinary natives.

The federal government's announcement to guarantee mortgages for aboriginals living on reserves is another positive step. Under the Indian Act, financial institutions cannot collect on default loans on reserves, therefore it is difficult for natives to join the Canadian mainstream by becoming homeowners.

Federal Indian Affairs Minister Jim Prentice has signaled he will introduce matrimonial property rights on Canada's native reserves. And a bill in the Senate to expand human rights laws to native reserves has also won support from Minister Prentice.

Grade: B

8. The Senate - Elect or Abolish the Upper Chamber
Prime Minister Harper announced in April he will appoint Bert Brown to the upper chamber of Parliament. Mr. Brown was re-elected as an Alberta "senate nominee" in province-wide voting in November, 2004. He was the first choice of a majority of voters in that province.

Mr. Harper has made Senate reform a priority. Government legislation before the Senate will set eight-year term limits on new senators. A second bill before the House of Commons will allow for the indirect election of senators. Rather than pursue a constitutional amendment to permit direct elections, the Prime Minister will allow provinces to elect candidates for the Upper Chamber. The Conservative government will accept these submissions and appoint the candidates to the Senate thereby ensuring the will of voters is respected -- as was done with Senator-elect Brown. It is hoped this process will overtime become convention and be respected by future governments.

Grade: A

9. Scrap Kyoto
The good news is Mr. Harper has said he will not sacrifice jobs or endanger the Canadian economy in a vain attempt to fulfill the Kyoto Protocol. As such, the Liberal's $10-billion Kyoto scheme will not be implemented. The international accord committed Canada to cutting emissions of greenhouse gases by 6 per cent from 1990 levels by 2012. Yet emissions are 27 per cent above 1990 levels and 35 per cent above the Kyoto target.

In April, Environment Minister John Baird unveiled a plan to curb emissions by heavy emitters. The plan will require most industries to become 18 per cent more energy efficient by 2010, and cut greenhouse gases by 20 per cent by 2020. It will cost the Canadian economy between $7-billion and $8-billion a year. Consumers will pay more for some energy intensive products. But rather than adopt government command-and-control solutions, Mr. Baird is leaving it to businesses to find market driven solutions. Industry leaders grumble that the plan will be costly but is achievable.

Grade: C+

10. End Long-Gun Registry
The Conservatives have tabled a bill to repeal the long-gun registry, although its passage in the House of Commons is unlikely.

Although the government has not cut off the registry's funding it has been reduced. Public Safety Minister Stockwell Day last year announced a package of fee waivers and amnesties to take the teeth out of the registry and free rifle and shotgun owners from complying with the rules. This amnesty was recently extended for a second year.

Grade: B

The next installment will grade the Conservative government on 10 additional agenda items, measuring progress -- or lack thereof -- to abolish corporate welfare, reform foreign aid, cut taxes and control spending.

CRA News Release: Electronic filing of income tax returns increases in 2007

The following is an exerpt from a news release from the Canada Revenue Agency.

Ottawa, April 19, 2007... The Canada Revenue Agency (CRA) announced today that, as of April 1, 8.3 million people have filed their 2006 income tax returns. Of these returns, 62.4% were filed electronically, as opposed to 61.2% at the same time last year.

The CRA is responding to the interest and enthusiasm that Canadians show for electronic services by investing time and resources to improve its state-of-the-art suite of electronic services and to provide a wide range of electronic filing options.

Of the approximately 25.8 million Canadians who file an income tax return, more and more are discovering that electronic filing is the fastest and easiest way to prepare and file their returns. There are fewer errors and individuals get their tax refunds in eight business days, or less, with direct deposit. In addition to filing a return over the Internet using NETFILE, Canadians can file over the telephone using TELEFILE, or they can file using EFILE through the services of a professional tax preparer.

The full text of the news release can be found at:
http://www.cra-arc.gc.ca/newsroom/releases/2007/april/nr070419-e.html

Electronic Tax Filing Glitch at CRA

The Canada Revenue Agency has released an important message concerning technical difficulties the agency is experiencing with its electronic tax filing services.

From the CRA web site:

"The Canada Revenue Agency (CRA) is experiencing electronic system difficulties that prevent the public from accessing some electronic services such as NETFILE, TELEFILE and EFILE. We have temporarily shut down public access to electronic services to ensure the integrity of taxpayer information.

The CRA has a team working to restore its systems to normal operations but it will be a matter of days before the system problems are completely resolved. The security and integrity of taxpayer data has not been compromised. This problem is not the result of illegal activity, computer hackers or a virus.

We have now traced the source of the problem to software maintenance conducted on March 4, 2007. We are currently working to bring all systems back online gradually."

For more information, visit the CRA web site at www.cra.gc.ca

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

The State has no Business in the Refrigerators of the Nation

For too many politicians and bureaucrats most problems can be solved with a healthy serving of taxation and a side order of regulation. The latest? Taxing and regulating “bad foods” to tackle the obesity epidemic. Those very smart persons in government and academia conclude that if we taxed Big Macs and Eat More bars we’d all reduce our consumption of “bad foods” and fill the streets with Lance Armstrong look alikes. The concept is nothing new.

Cigarettes and alcohol have been deemed ‘politically incorrect’ for years. More recently gasoline was added to the list. Apparently, heating your home or driving your kids to school is a “SIN” so we tax it in the hope that consumption will be reduced. Is it working?

People continue to drink and smoke. And, horror of horrors, people continue to heat their homes in winter. It’s true that the choices many people make are not healthy ones. And it’s also true that they shoulder responsibility for those choices. But is arming the Nanny state with food police a good idea?

Imagine bureaucrats deciding which foods are “healthy” and which aren’t. Would a high-carb potato be subject to the tax? What about the fatty but protein-rich steak? A new skyscraper would have to be constructed in Ottawa to manage the exemptions and inclusions, while lawyers would be required to defend those decisions against food producers who think their particular product should not be subject to the tax. Government could call it the indigestion tax!

Studies done in the United States indicate a link between socioeconomic status and obesity. Basically, the less education you have and the lower your income, the more likely you are to be obese. This tax proposal only exacerbates their plight. Making poor people poorer further limits their choices. It doesn’t make them healthier.

Second, what does taxing food have to do with obesity at all? Just because someone eats a candy bar doesn’t mean they’re obese. The only point in imposing an obesity tax on a marathon runner who enjoys a Snickers bar once in a while is that it – pardon the pun – fattens government coffers. And that’s the real agenda here.

There are two alternatives to taxing food.

One rests in the demands of the market place. The fact is, even McDonald’s consumers can order a salad and low-fat yogurt. Why? Because McDonald’s understands sensible people on the go want alternatives to Big Macs or they will go somewhere else to eat. It’s the same reason car manufacturers are beginning to produce hybrids on a mass scale and why many restaurants went smoke free long before the Nanny state arrived. The market responds to consumer demand.

Finally, if Canadians paid out of their own pocket for their own health care there would be a built-in incentive to choose healthier lifestyles. Buffet-style, one-premium-fits-all style health care insulates people from the consequences of their choices. Insurance premiums are based on the relative risk an individual poses. If someone smokes, is over weight and drinks excessively, his or her health premium will rightly be higher than for someone who exercises three times a week and doesn’t smoke. Canadians face – and indeed welcome – these consequences every day when it comes to renewing their automobile and life insurance policies.

If policy makers want to tackle obesity then they should consider reforms to medicare premiums as an alternative to creating multi-billion dollar food police and bureaucracies that have more to do with stuffing government coffers than instilling personal responsibility in those who are genuinely at risk. Former Prime Minister Pierre Trudeau once quipped that the state has no business in the bedrooms of the nation. Well … it has no business in the refrigerators of the nation either.

Troy Lanigan and David MacLean, Canadian Taxpayers Federation

John Williamson
Federal Director
Canadian Taxpayers Federation

CRA News Release: Stamping of hand delivered mail at CRA Local Offices

The Canada Revenue Agency (CRA) has announced it will provide a uniform on demand date stamping service for hand-delivered correspondence in every local CRA office across Canada.

According to the CRA News Release:

"Canada's New Government is putting the taxpayer first by working with the CRA to deliver better customer service," Minister Skelton said.

In recognition of the value that some taxpayers and tax practitioners place on date stamping, the CRA will implement uniform date stamping on demand in all local offices. The service will consist of placing a stamp on envelopes received at local office counters for deposit in drop-boxes.

For more information on this CRA News Release, please see:
http://www.cra-arc.gc.ca/newsroom/releases/2006/dec/nr061207-e.html

Tax Freedom Day Arrives Monday

Tax Freedom Day Arrives Monday – More Evidence Canadians Remain Over-taxed
And StatsCan Reports Total Government Surpluses Hit $26-B in ’05

The Only “Fiscal Imbalance” is Between Governments & Taxpayers

Ottawa: The Canadian Taxpayers Federation (CTF) today responded to news from the Fraser Institute that Tax Freedom Day for Canada will occur on Monday, June 19th. Tax Freedom Day is the day of the year when taxpayers finally start working for themselves after paying the total tax bill imposed on them by all governments. The original release and calculations are available at: www.fraserinstitute.ca.

“Canadians this year will work 169 days to feed the appetite of all three orders of government, chewing up 46 per cent of average family income,” stated CTF federal director John Williamson. “Government officials insist broad-based tax relief just isn’t possible. Yet millions of Canadians recognize our politicians don’t tax to collect the money it needs, instead governments always find a need for the money it collects. Isn’t it time the requirements of taxpayers were given a higher priority?”

Statistics Canada reported on June 15, 2006, that the combined surplus for all Canadians governments was $26-billion last year (2005/06 fiscal year), the second highest level in 20 years. Governments collected revenues of $572.9-billion in taxes and spent $546.9-billion. The agency found “revenues were up 6 per cent, outpacing the 4.1 per cent gain in spending.”

“This is evidence governments of all political stripes are taxing Canadians too heavily. The StatsCan figures are based on ’05 data. The fiscal forecast for the current year is even rosier, meaning total tax revenues flowing to governments will continue to grow,” noted Mr. Williamson. “Politicians just don’t get it. If taxes cannot be reduced when Tax Freedom Day is arriving on June 19th it signals Canadian governments have a spending problem, not a revenue problem. When will this imbalance be fixed?”

John Williamson
Federal Director
Canadian Taxpayers Federation

Tax Cuts and the "Fiscal Imbalance"

The Canadian Centre for Policy Alternatives (CCPA)this week released Tax Cuts and the "Fiscal Imbalance," by CCPA Senior Economist Marc Lee.

From the CCPA news release:

This new study warns that solving the alleged "fiscal imbalance" runs the risk of becoming a downsizing exercise for the federal government.

The study, authored by CCPA Senior Economist Marc Lee, breaks the "fiscal imbalance" code. Different definitions of the term "fiscal imbalance," in a context of federal-provincial fights over cash and partisan politics, have muddied the waters of the debate.

"The term 'fiscal imbalance' is a loaded one," says Lee. "It is a pejorative term that implies that balance must be restored. But a careful look at Canadian history and other federations worldwide suggests that Canada does not have deep structural problems that need to be fixed."

To date, the issue has revolved around provinces seeking more money from Ottawa. The report warns that, in its current incarnation, more radical decentralization measures could be put on the table due to pressure from influential lobby groups, like the Canadian Council of Chief Executives.

"Missing from the story is tax cuts and tax competition," Lee adds. "Provincial governments undercut their fiscal positions through tax cuts over the past decade. The decentralization push hinges around deep federal tax cuts to pay for the elimination of federal transfers for health care, post-secondary education and social welfare."

The complete report can be downloaded from the CCPA's web site: http://www.policyalternatives.ca

Why Are Personal Income Taxes Going Up?

Income taxes to increase to 15.25% this year and 15.5% in 07’
A 6% GST is a welcome start, but more tax relief needed
Program spending up 5.3% this year and 4.1% in ’07
Nothing to lower gas taxes or abolish the gun registry

Ottawa: The Canadian Taxpayers Federation (CTF) reacts to the 2006/07 federal budget, which was tabled in the House of Commons by Finance Minister Jim Flaherty this afternoon.

Tax Relief for Canadians –

“The bottom line for average taxpayers is a net benefit in 2006 and larger tax savings in 2007. Yet the federal government’s lowest personal income tax rate will rise. In 2005 it was set at 15 per cent and applied to the first $35,595 of income. The Conservative’s first budget will see this rate increase to 15.25 per cent this year and to 15.5 per cent in 2007,” said CTF federal director John Williamson. “So while the GST is being cut by one point, income taxes paid by ordinary Canadians will go up.”

“The one group that will benefit immensely from this budget is Canadian households with young children,” noted Williamson. “Economically, they will rocket ahead thanks to the government’s fulfilment of its promise to provide all families with $100 a month for each child under age 6.”

Federal Finance Department briefing documents prepared for Finance Minister Flaherty state that Canada’s “personal and corporate income tax burden are the highest among the G7 countries.”

“Budget 2006 does take steps to reduce a series of regressive corporate taxes, particularly on small and medium businesses,” said Mr. Williamson. “The measures include immediately abolishing Ottawa’s capital tax, eliminating the corporate surtax in ’08, and reducing the general business tax rate to 19 per cent from 21 per cent by 2010. Yet this government should have moved to bring down personal income taxes. This will need to be the top priority for the 2007 Budget.”

Gas Taxes –

In August, 2005, then-Opposition leader Stephen Harper blasted the Liberal government for refusing to reduce gas taxes as prices soared. “There is no reason for the federal government to profiteer when consumers are hurting,” he said urging the previous Liberal government to give motorists a break. “This is causing considerable dislocation. There are a lot of people on fixed incomes. There are a lot of businesses on thin margins that are going to be affected by this.”

“The price of gasoline has skyrocketed. Last week the national average price was over $1.00 per litre,” noted Williamson. “Despite the Prime Minister’s promises to reduce gas taxes, there is nothing in the budget to accomplish this goal. This is a disappointment.”

The Debt & Surplus Picture –

“We are pleased Minister Flaherty will reduce Canada’s monster debt by $8-billion last year and another $3-billion this year,” Williamson stressed. “Unfortunately the government will not implement a legislated debt reduction schedule. Debt servicing will chew up $35-billion this year, which amounts to $95-million each day. Ottawa should set yearly debt reduction targets as was done with the deficit and make those targets the law.”

Overall Size of Government to Increase due to Modest Spending Growth –

“Ottawa’s program spending growth will increase by 5.3 per cent this fiscal year to $189-billion, and another 4.1 per cent in 2007 topping out at $196-billion,” said Williamson. “If the government is capable of reducing spending in its non-priority areas and holding growth in others, the Conservatives will be able to offer broadly-based income tax relief in next year’s budget.”

What About Eliminating the Gun Registry?

In 1995, Canadians were told by Ottawa that the federal gun registry would cost $2-million and there would be no substantial cost to taxpayers due to registration fees. In 2003, the Auditor-General stopped an audit due to incomplete information and predicted the registry would cost taxpayers $1-billion. The price of registry is on track to exceed $2-billion.

“The Harper government needs to abolish the gun registry,” concluded Williamson. “If it does not have the necessary votes in the House of Commons to do so, it should cut off the program’s annual funding allowance and starve it instead. ”

John Williamson
Federal Director
Canadian Taxpayers Federation

2006 Federal Budget

Minister of Finance Jim Flaherty presented the 2006 federal budget, the first by a Conservative government in thirteen years, that proposes tax cuts and pays down debt.

The budget purports to deliver $20 billion in tax relief over two years. Some of the highlights include:

- a one-point reduction to the GST, effective July 1, 2006
- targeted tax measures to help Canadians with the cost of tools, textbooks, transit passes, and childrens' sports.
- $3.7 billion over two years for the new $1,200 Universal Child Care Benefit
- $1.5 billion more this year for agriculture.
- $1.4 billion more this year for policing, border security and public safety.
- $1.1 billion more over two years to rebuild the Armed Forces.

For all Budget 2006 information, see the Department of Finance Canada website at:
http://www.fin.gc.ca/budtoce/2006/budliste.htm

CRA debunks common tax myths!

In a recent taxpayer alert, the Canada Revenue Agency has issued a warning about certain tax myths being propogated by "a small number of unscrupulous individuals and groups... many of them claiming that you can lawfully refuse to pay taxes or file a tax return".

CRA advises Canadians:

"Be wary of such claims because they are based on faulty arguments and are not supported by law. Accepting them as fact could have serious legal implications for you, including fines, penalties and even jail time, plus any taxes and interest owed."

Some of the most common tax myths are identified in the taxpayer alert on the CRA website at:

http://www.cra-arc.gc.ca/newsroom/alerts/2006/a060425-e.html

CRA tax tip: leave your cash at home

The Canada Revenue Agency has released a tax tip reminding Canadians that the "CRA prefers that if you are making a payment in person at one of its counters, you use a cheque, debit card or money order."

"You can save time by paying your personal and/or business tax through your financial institution's telephone and Internet banking services. It's secure, private, convenient, and you don't have to wait in line or find a parking spot! Depending on the institution you deal with, you may even be able to future-date your payments."

For more information on this tax tip visit the CRA website at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2006/tt060330-e.html

CRA tax tip: self-service options

The Canada Revenue Agency has issued a tax tip inviting Canadians to help themselves by taking advantage of the CRA's self-serve Internet options.

New features coming over the next two years will include access to Internet kiosks and the abiltiy to arrange appointments to speak with an agent in person.

For more information on this tax tip, see the CRA website at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2006/tt060328-e.html

Who Benefits From the Conservative Tax Cut Promises?

Today the Canadian Centre for Policy Alternatives (CCPA) released a new analysis finding that high-income families will receive a disproportionate share of the benefits from the Conservatives' tax-cut promises.

The report, Standing Up For Which Families? Who Benefits From the Conservative Tax Cut Promises, by CCPA Research Associate Sheila Block and CCPA Senior Research Economist Ellen Russell, is available through the CCPA website. A news release summarizing the report's key findings is also available on the CCPA website: http://www.policyalternatives.ca

From the CCPA news release:

"According to Standing Up For Which Families? Who Benefits From the Conservative Tax Cut Promises, by CCPA Research Associate Sheila Block and CCPA Senior Research Economist Ellen Russell, the 5.4% of families earning over $150,000 a year will receive 27.9% of the benefits from the Conservatives' tax cuts modelled in the report, an average of over $2,010.

Almost half of Canadian families (48.6%) earn less than $40,000, yet they will receive only 20.3% of the benefits of the Conservative tax cuts, an average of just over $163."

The CCPA study concludes with a proposed redesigned tax package that demonstrates how the Conservatives could more effectively and efficiently lower taxes for low- and middle-income families.

For more information, see:
http://www.policyalternatives.ca

CRA tax tip: paying taxes via your bank

The Canada Revenue Agency has issued a tax tip to Canadians reminding them that they can pay taxes through most Canadian financial institutions:

"You can save time by paying your personal and/or business income tax through your financial institution's telephone and Internet banking services. Depending on the institution you deal with, you may even be able to schedule post-dated payments.

If this is convenient, you may also want to check with your financial institution if you can file your GST/HST return or remit any balance owing through the Canada Revenue Agency's (CRA) GST/HST-EDI service."

For more information on this tax tip, see the CRA website at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2006/tt060322-e.html

CRA TAX TIP: REGISTER FOR AN EPASS TODAY!

The Canada Revenue Agency has issued the following tax tip... Avoid a delay - register for an epass today!

"By registering early for an epass, you will be able to access your personal tax and benefit information online through My Account for individuals without any waiting. The epass registration process is done in two steps: select a User ID and password and answer three questions. You will be asked to provide some personal information to the Canada Revenue Agency (CRA) to confirm your identity and you will then receive a mailing of a CRA activation code, which will take approximately five business days to receive (15 days if outside Canada or the U.S.). You will then be able to access your personal information within My Account by simply logging in, using your epass User ID and password."

For more information on this tax tip, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2006/tt060309-e.html

What to do when you hire a contractor

The Canada Revenue Agency has issued a Taxpayer Alert reminding Canadians to protect themselves when hiring a contractor, to be aware of cash deals without contracts or receipts, and avoid contributing to the underground economy.

"Without a contract, you could lose any deposit or advance payment given to the contractor, or find yourself charged far more than you expected. There is little you can do about poor quality or incomplete work and no assurance that you will get warranty coverage and after-sales service.

If you participate in the underground economy, you affect the government's ability to provide services such as health care, pensions and employment insurance. The CRA takes this problem seriously, and has over 1200 employees involved on identification, audit and enforcement initiatives aimed at addressing the underground economy."

For more information on this Taxpayer Alert, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/alerts/2006/a060220-e.html

CRA Tax Tip: Signing up to be a rep

The Canada Revenue Agency (CRA) has released a new tax tip on signing up to be a representative.

Through the CRA web site you can now register the new "Represent a client service". Upon registering you will receive a representative identifier (RepID) which you can then give family and friends so that they can authorize you to deal with the Canada Revenue Agency online on their behalf. The service also applies to small businesses with no Business Number (BN).

For more information about this tax tip and the representative service, please refer to the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/taxtips/2006/tt060220-e.html

Business tax help on Saturdays

In a recent news release, the Canada Revenue Agency has announced that it is now offering business tax help on Saturdays.

"The Canada Revenue Agency (CRA) will provide service on its business enquiries telephone lines on two Saturdays, February 18 and February 25, 2006, from 10:00 a.m. to 4:00 p.m. (local time). This extended service will assist employers who need help preparing T4 slips for employees.

The business enquiry telephone service operates year round with agent-assisted service available from Monday to Friday between 8:15 a.m. and 8:00 p.m. Automated service is available the rest of the time.

The business enquiry telephone number is 1-800-959-5525."

For more information on this news release, visit the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2006/feb/nr060216b-e.html

New multiple format service for visually impaired persons

The Canada Revenue Agency and the Canadian Human Rights Commission jointly announced today that the CRA will now offer a new multiple format service for visually impaired individuals.

"The new multiple format service will allow visually impaired Canadians to self-identify to receive CRA printed material in the alternate format of their choice by making a one-time alternate format request to the CRA.

Once an individual has self-identified, the CRA will send all subsequent material that is specific to the individual, such as a Notice of Assessment, in the alternate format of choice. To obtain publications that are not client-specific, such as generic tax information publications, visually impaired individuals will be required to make a separate request."

For more information on this News Release, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/releases/2006/feb/nr060216-e.html

THE SR&ED PROGRAM

The Scientific Research and Experimental Development (SR&ED) program is a federal tax incentive program to encourage Canadian businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada. The program has been designed to encourage the development of new, improved, or technologically advanced products or processes by Canadians and Canadian businesses.

According to the CRA web site, the SR&ED program is the largest single source of federal government support for industrial research and development in Canada. You may be eligible to apply for SR&ED investment tax credits for expenditures such as wages, materials, machinery, equipment, some overhead, and SR&ED contracts.

For more information on the Scientific Research and Experimental Development (SR&ED) Tax Incentive Program, including eligibility and the application process, see the CRA web site at:
http://www.cra-arc.gc.ca/taxcredit/sred/menu-e.html

Final Gomery Report Fails to Impress Taxpayers

Narrow Recommendations Insufficient to Thwart Future Scandals

Conservative & NDP Accountability Measures More Encompassing

Ottawa – The Canadian Taxpayers Federation (CTF) reacted to Judge John Gomery’s report on the sponsorship scandal, released yesterday, and its recommendations to restore accountability in our nation’s capital. The first Gomery report, released in November, revealed to Canadians that of the $355-million spent on the Quebec sponsorship program approximately $150-million went to Liberal-friendly ad agencies, many of whom charged the federal government for work of little or no value.

“Judge Gomery first volume did a good job detailing the mechanics of Adscam to Canadians, but his second is disappointingly narrow in its sweep,” said CTF federal director John Williamson. “There certainly are some good recommendations. Yet in some cases he identifies real problems, but fails to make specific reform measures. Elsewhere, he simply ignores longstanding troubles altogether, as he did with Ottawa’s dysfunctional Access to Information Act.”

In Restoring Accountability – Recommendations Judge Gomery writes, “I have become convinced that we need to rebalance the relationship between Parliament and the Government in order to attain better accountability within government.” (Emphasis added.) “Unfortunately, the Gomery Commission addressed only one specific scandal and suggested narrow recommendations related to it,” observed Williamson. “But taxpayers expect reforms that will change Ottawa’s culture of secrecy, entitlement and lawbreaking that rarely results in penalties or sanctions being imposed. Yes, such a change will require greater accountability within government. But it also mandates accountability outside government, between public servants and citizens.”

Prime Minister-designate Stephen Harper re-affirmed his promise to pass the Conservatives’ own Federal Accountability Act. The proposals include specific measures to reform how political parties and candidates are financed, strengthen the Lobbyist Registration Act, ensure appointments are merit-based, reform the government’s procurement process so it is free from political interference, legislate an effective whistleblower law, increase the powers of the auditor-general as well as those of the ethics and information commissioners, dramatically expand Ottawa’s freedom of information law, improve government auditing, and establish an independent director of public prosecutions. Similarly, The New Democratic Party proposes reforms to fix government and make it more transparent to Canadians.

“If voters had to choose between Judge Gomery’s recommends and the Conservative and New Democratic accountability packages, the choice is an easy one. If the goal is to clean up Ottawa, taxpayers are further ahead with what was promised on the campaign trail. That’s the measuring stick the CTF will be applying in the months and years before us,” concluded Williamson.

John Williamson
Canadian Taxpayers Federation

Taxpayers’ Agenda for the New Government

Prime Minister-designate Stephen Harper was not sent to Ottawa to revolutionize the federal government. Nonetheless, the election outcome is good news and Canadians expect him to deliver much-needed reform once the new government is sworn in on Monday.

Even with a minority of seats in the House of Commons, Mr. Harper has an opportunity to transform federal-provincial relations, modernize Ottawa’s democratic institutions, and reform how tax dollars are spent and collected. As prime minister, he can ensure the priorities of taxpayers are those of the federal government’s. There is much to be done. To track progress, or lack thereof, the Canadian Taxpayers Federation has sketched out its priorities.

Because the Conservatives will be judged the moment they are out the gate, Mr. Harper should limit his Cabinet to 24 members and not overload the executive with an excessive number of parliamentary secretaries. The Cabinet’s first task will be determining what to do with Judge John Gomery’s accountability recommendations. More responsibility and transparency is the top issue for Canadians. The Gomery reforms should be quickly passed into law along with the Conservatives’ own Federal Accountability Act. An additional step to undo Ottawa’s culture of entitlement is reducing pension and severance entitlements paid to Members of Parliament so they are in line with public expectations.

Next up is the 2006 budget. Enacting a legislated debt repayment schedule and eliminating the over-taxation fuelling Ottawa’s multi-year, multi-billion dollar surpluses will be welcomed by taxpayers. As promised, the new government should lower the GST. It should also reduce Employment Insurance tax premiums and preserve the Liberal’s personal income tax reduction. The Conservatives say they plan to increase the lowest income tax rate from 15 per cent to 16 per cent. Such a change will incur the wrath of taxpayers and peg Mr. Harper as a tax hiker.

To temper Ottawa’s overreach into provincial jurisdictions of health care and education, federal tax points should be relinquished to the provinces. This reform will ensure provinces have secure tax revenue for health care, remove Ottawa’s ability to unilaterally reduce them, and provide taxpayers with greater accountability. Further on the health care front, the federal government should respect the Supreme Court of Canada’s Chaoulli v. Quebec decision, and permit provinces to experiment with medicare delivery reform – including the use of private health care.

When it comes to spending, the new government must be cautious and limit program spending increases to inflation and population growth. The Liberals’ bureaucratic daycare plan – with its misguided focus on warehousing children – must be repealed and replaced with a universal tax credit or payment payable to all families with young children.

To increase accountability and transparency within the aboriginal portfolio, an independent ombudsman for the department of Indian and Northern Affairs should be established that reports directly to Parliament. To improve the lives of native Canadians, Ottawa should amend the Indian Act to include matrimonial property rights and the Human Rights Act.

Make gas taxes a user fee and ensure municipalities put these tax revenues into potholes, highways and bridges. Fuel tax revenues not spent on roads and infrastructure ought to be returned to motorists.

Many tax dollars can be saved by cutting off funding for the disastrous federal gun registry and scrapping Ottawa’s $10-billion Kyoto Protocol implementation plan. Canadians want a clean environment and proposals that work. No tax dollar should be sent to developing countries for carbon dioxide emission credits – so-called “hot air” – to meet Kyoto targets. Abolishing corporate welfare programs will save another $2-to-$4-billion each year. These wasteful projects funnel subsidies to businesses and provide handouts to failed regional development projects. Corporate tax relief should be conditional on businesses forgoing subsidies. Lastly, Ottawa’s $22-billion discretionary spending budget is a prime target to reduce waste.

Abroad, our values should be reflected by making our foreign aid contingent on a country’s willingness to practice and promote democracy, respect for human rights and government accountability. Communist China should not be Canada’s largest foreign aid recipient – divert that money elsewhere.

The operations of Parliament must be fixed. With a vacancy on the Supreme Court, Mr. Harper must quickly implement a multi-partisan nomination process that ensures MPs have meaningful input. When naming the heads of Crown corporations, agencies and other top government jobs, similar multi-party support must be secured. A citizens’ assembly on voting reform should be established, and the Senate should either be elected or abolished. Canadians should be empowered to recall promise-breaking politicians from office and petition for the enactment or repeal of laws between elections. And before the next election, it will be necessary to bring tax credits for political parties in line with what is offered for other charitable organizations, and to do away with the subsidy that pays political parties $1.79 per vote received in the last general election.

Depending how well the Harper government fulfills these priorities will determine the level of cheers – or jeers – from many Canadian taxpayers.

John Williamson
Canadian Taxpayers Federation

Canada's "closed shop" election campaign

Many Canadians have come to realize that changes to Ottawa’s political structures and institutions are as important – and perhaps even more so – than the representatives that will be elected to Parliament on January 23rd. The Canadian Taxpayers Federation (CTF) will release seven commentaries during this campaign that focus on broad themes of accountability and democratic reform measures. This final commentary in the series is written by CTF Manitoba director Adrienne Batra on the subject of Canada’s “closed shop” election campaigns that limit citizen participation. Adrienne is available for media interviews or comment on this subject by calling (204) 227-5561 or e-mailing her at abatra@shawbiz.ca.

January 17, 2006

Restricting Citizens from Participating in Election Debate Unhealthy for Democracy

“Of the parties, for the parties, by the parties.” Okay … it is not exactly the perfect fit for a bumper sticker, but when it comes to describing Canada’s election laws this slogan fits perfectly.

Imagine designing an electoral system from scratch. Principles such as citizen participation, open debate, fair and transparent regulations among others would be paramount. To be sure, Canada’s Election Act contains many important rules and regulations that are central to any proper functioning democracy. However, at 250 plus pages and years of political parties writing their own rules, elections in Canada are increasingly becoming the purview of established parties and their battery of lawyers and accountants.

Consider the 1993 case – ironically – brought forward by the Communist Party of Canada. In the 1993 general election, the Communist Party of Canada lost its party status because it failed to nominate at least 50 candidates. The consequence? Deregistration, liquidation of its assets, payment of debts, and a surrender of any outstanding balance to the Chief Electoral Officer. Thankfully, the Supreme Court ruled in Figueroa v. Canada that the 50 candidate threshold "undermines the right of citizens to meaningful participation in the electoral process."

No kidding. But it is not just new political entrants – like the Green Party – the established parties seek to inhibit; it is citizens too.

Gag laws restrict – and even prohibit – the right of citizens and citizen groups from advertising during election campaigns. Failure to comply with such anti-democratic statism results in fines ranging from $1,000 and three months in prison to $5,000 and five years in prison.

Gag laws imposed by the federal government in 1984, 1994, by the B.C. government in 1996, and Quebec government in 1997 were all struck down by the courts as Charter violations against free speech. Unfortunately, Ottawa never gave up and in 2004 the Supreme Court of Canada ruled in Harper v. Canada that spending restrictions by citizens of $3,000 in each riding was acceptable. Of course, while citizens are limited to $150,000 for a national campaign, political parties can spend upwards of $18-million. And it does not end there.

Even a citizen – or citizens’ group – that spends $501 or more must file an "election advertising report" with the Chief Electoral Officer, listing the names and addresses of every individual who donated more than $200. If a group is unable to identify which donations were made "for election advertising purposes" it must report the names and addresses of every person who donated over $200 during the six months prior to the election call.

Imposing bureaucracy on grassroots activism of concerned citizens (from veterans groups to unions and taxpayers associations) with harsh penalties for non-compliance is a cold, wet blanket that stifles freedom of speech and freedom of association. Rather than risk breaking the law or even getting tangled in a bureaucratic web, most Canadians limit their participation in our democracy to quietly contemplating their vote. And of course paying taxes to fund the campaign activities of politicians.

There used to be a time when a political party would go out and earn its keep. They would develop policy and seek voluntary donations to advance their cause. Today, the established parties have become all but case-loads of the welfare state. Donate a $100 to the local United Way and you will receive a $15 tax credit. Donate $100 to “a registered political party” and you will get $75 back. Politicians should be ashamed of themselves.

Now, new rules grant political parties annual subsidies of $1.75 per vote received in the previous general election. This is on top of candidates being reimbursed 60 per cent of their election expenses if they get over 10 per cent of the vote. Add it all up and parties can expect to receive $94-million in taxpayers’ money, plus an additional $33-million in candidate reimbursements over the next four years.

Aside from the ethical issue of being forced to pay for political views you may find abhorrent, handing out tax dollars to political parties and candidates further distances them from an increasingly cynical public by removing that old-fashioned idea of having to earn support. But it appears election laws are more about entrenchment of the current players than accountability for the concepts of citizen participation, open debate, fairness and transparency. “Of the parties, for the parties, by the parties.” Indeed.

Adrienne Batra is the Canadian Taxpayers Federation’s Manitoba director based in Winnipeg.

John Williamson
Canadian Taxpayers Federation

Email scams and taxes on lottery winnings

The Canada Revenue Agency (CRA) has issued a Taxpayer Alert to be aware of email scams (generally originating in a foreign country) stating that you have won a lottery or sweepstake but to receive the prizeyou must first pay part of the taxes owed on the prize amount. The CRA reminds Canadians that no taxes are owed on lottery or sweepstake winnings in Canada:

No taxes or fees of any kind have to be paid on lottery winnings in Canada. Any unsolicited email, letter, or telephone call telling you otherwise is a scam. Do not, under any circumstances, send money to someone making such a pitch to you. Instead, immediately contact your local police department or the Royal Canadian Mounted Police.

For more information on this Taxpayer Alert, see the CRA web site:
http://www.cra-arc.gc.ca/newsroom/alerts/2006/a060118-e.html

Liberal Party Misquotes CTF Federal Director

Ottawa: The Canadian Taxpayers Federation (CTF) today responded to a news release issued by the Liberal Party of Canada that misrepresents statements made by its federal director John Williamson on the subject of the Conservative proposal to defer capital gains taxes when savings are re-invested. Mr. Williamson is erroneously cited as stating investments will never be taxed.

“We wish the Conservative Party capital gains tax plan meant a $6-billion tax cut and the outright elimination of Canada’s capital gains tax. But it does not,” stated Mr. Williamson. “For the Liberals to suggest I said anything to that affect is absolutely false.”

The Liberal press office issued a news release on Jan. 16th entitled, Conservative Finance Critic Contradicts Platform on Capital Gains. It states the Conservatives “are back-pedalling on their tax cut” because Finance Critic Monte Solberg “said the Conservatives are not planning the ‘elimination’ of the capital gains tax: ‘We’re talking about a deferral.’ Fellow Conservative MP Jason Kenny (sic) also told Don Newman on CBC’s Politics today that the Conservative proposal is only a deferral.”

The governing Liberals attempt to bolster their case by inaccurately referencing Canada’s foremost taxpayer advocacy group. The release continues: “[Kenney] in turn was contradicted by John Williamson, the federal director of the Canadian Taxpayers Federation, who said the plan features untaxed inter-generational transfers. ‘With our demographic changes, as assets are passed off from one generation to the next, individuals will have the chance to sell them and re-invest them for their retirement rather than these assets being taxed,’ said Williamson.”

This is only half the story, and just the first half of Mr. Williamson’s quote.

Canadian Press journalist Tara Perkins reported on January 13, “But he [Williamson] pointed out that the move only defers the payments of capital gains tax. Those taxes will still be paid at the point when the assets are sold without being reinvested. ‘At some point people need to check out, the need to take out those investments and live off them,’ Williamson said. ‘There's nothing here that will help individuals who are checking out.’” This significant qualifying remark appeared nowhere in the Liberal news release.

Williamson concluded today: “Notwithstanding the Liberal spin, the bottom line is the capital gains deferral is the most pro-growth tax policy to emerge in this campaign. It will encourage Canadians to save more, expand Canada’s capital markets and improve the nation’s productivity. But Ottawa still needs to bring down marginal tax rates. Whichever party forms government on January 23rd, the CTF will continue to press for lower rates so Canadians are taxed less on their income and retirement savings.”

John Williamson
Canadian Taxpayers Federation

Minority governments achieve progress for people

With only two weeks to go before the next federal election, the Canadian Centre for Policy Development has released the Alternative Federal Budget report stating "Minority governments achieve progress for people".

From the CCPA:

OTTAWA—Today the Alternative Federal Budget released a detailed report card on the achievements of the 2004-05 Minority Parliament and awarded the Martin Minority an overall C grade for “some progress.”

Minority Report: A Report Card on the 2004-05 Minority Government outlines the problems, grades the efforts, and outlines an unfinished People’s Agenda for the next government. The report, published by the Canadian Centre for Policy Alternatives, was put together with input from numerous civil society organizations representing millions of Canadians.

“One of Canada’s most persistent political myths is that only majority governments are able to make meaningful change. The reality is frequently the reverse,” explains AFB Coordinator Judy Randall. “Minority Parliaments have often been the most effective in terms of achieving real progress for people.”

Two decades of back-to-back majorities under successive Conservative and Liberal governments delivered largely on the demands of corporate Canada, not the broader electorate. That agenda was stalled, at least temporarily, under the minority Parliament of 2004-05.

The report can be found on the CCPA web site.

Don’t Trust the Rascals to Lower Taxes Without Seeing a Plan

When the federal election began Canadians were told it would not change a thing. Voters would return a minority government – likely a Liberal one – and the new Parliament would continue on just like the old. It remains too early to guess the results, yet some are now predicting a Conservative government. But even if voters opt for the status quo and more of the same, the campaign has still forced an adjustment in one important portfolio – tax policy.

Paul Martin had been saying for the last two years it was not his priority to cut taxes. Moreover, he did not believe lower taxes were a priority for Canadians. With an election underway the prime minister’s tune has changed. In November, the governing Liberals announced $30-billion in tax relief, with middle class income tax cuts kicking in only in 2010. What is immediate is retroactive personal tax relief of $323 in 2005 for average taxpayers. Because taxes have been collected for the ’05 tax year, the tax reduction will be refunded to taxpayers in the spring – coincidently the period when Mr. Martin had wanted to hold the election.

Canadians have the ongoing campaign to thank for these small tax savings. (Canadians will pocket them regardless of the election outcome.) And because the ’05 tax cuts are now built into the tax code, they will rollover to the New Year. As a result, net tax savings in ’06 will total $385, a bit higher due to lower Employment Insurance payroll taxes.

More can – and should – be done to lower the taxes paid by hardworking Canadians. Ottawa’s six-year cumulative surplus – including the annual $3-billion contingency reserve – is expected to be $72.5-billion, an average of $12-billion a year. And thanks again to the campaign, the two major political parties – the Liberals and Conservatives – are promising more help if they are elected to govern Canada. Are they serious or paying lip service to win votes?

Mr. Martin has said he will lower income taxes on the middle class – although has yet to provide any details. Conservative leader Stephen Harper will reduce the 7 per cent GST to 5 per cent, and has hinted at additional income tax relief. There are few votes to be won by way of higher taxes: Even New Democrat leader Jack Layton says his party will not raise taxes! All this is mainstream recognition Canadians are suffering under an unnecessarily high tax burden. But can taxpayers trust any of these rascals?

“I believe we should cut personal income taxes,” Mr. Martin said following the Conservative announcement to cut the GST. “Canadians should keep more of their paycheque.” This is happy news. Yet voters are all too familiarly with politicians saying one thing during a campaign and doing the exact opposite after all the votes are counted. Mr. Martin has made too many empty promises in office. Before Election Day, the Liberals need to layout their tax relief proposals for Canadians to judge.

The Conservative Party, which has long advocated taxing Canadians a little less, must also provide more details. Or is the sum of Mr. Harper’s tax plan to cut the GST by 1 point in 2006 and another point over the next 3 or 4 years? A GST reduction is welcome, but not enough to really excite taxpayers. A bolder tax plan is expected from the supposed government-in-waiting.

The federal government offered Canadians broadly-based business and personal tax cuts prior to the 2000 election. With politicians out searching for votes for another three weeks, Canadians should consider the 2005 and 2006 tax savings a down payment and press for more. Ottawa is recording multi-year and multi-billion dollars surpluses. A surplus is nothing more than over-taxation by government. It is time to return surplus money back where it belongs, to Canadians taxpayers. But before Canadians vote, they will want to compare the Grit and Tory tax plans.

John Williamson
Canadian Taxpayers Federation

Meager Tax Savings in 2006

Meager Tax Savings in ’06 (But Taxpayers Gain in ’05)

Ottawa: The Canadian Taxpayers Federation (CTF) today released calculations of personal income and payroll tax savings that will come into effect on January 1st, 2006. Also included are retroactive personal income tax changes – which apply to the 2005 tax year – announced by the finance minister in the November economic update. The CTF tax calculations include those measures being administered by the Canada Revenue Agency, and apply regardless of the federal election outcome.

“Federal tax reductions will give all taxpaying Canadians some relief in ’05 and ’06,” said CTF federal director John Williamson. “Lower income taxes and employment payroll taxes will give the average taxpayer a net gain of $62 in 2006. However, last minute personal income tax changes announced in November will result in the average taxpayer savings $323 in 2005. Because these tax reductions are built into the tax code they roll into the next year. As a result, cumulative tax savings in ’06 will be $385.”

Tax Savings in 2005, 2006 & 2006 Cumulative – Annual Income of $45,000

Tax Year Higher BPE Lower PIT EI Reduction Total 2005 $75 $248 0 $323.00 2006 $30 0 $31.70 $61.70 2006 Cumulative $105 $248 $31.70 $384.70

CTF Calculations.

Personal Income Tax Reductions and Savings (2006 and 2005) –

In 2006 the basic personal exemption (BPE) – which is the amount an individual earns before paying federal income taxes – will increase by $200 above the inflation rate (this change plus indexation will boost the BPE to $9,039 next year). This measure will save all taxpayers an additional $30 per year starting in 2006.

The November economic update increased the BPE by $500 (from $8,148 to $8,648), and lowered the bottom personal income tax bracket from 16 per cent to 15 per cent. Both measures kicked in retroactively to January 1st, 2005. Together, they will save all taxpayers earning $35,595 or more $323 a year, starting in 2005. (The BPE change results in a $75 savings and the lower tax rate translates into a $248 savings. Chart 1 highlights the tax changes – with indexation for 2006 – for various income levels and for the 10 provinces: http://www.taxpayer.com/pdf/2005-2006_Tax_Savings.pdf)

2006 Employment Insurance Reductions and Savings –

Effective January 1st, 2006, Employment Insurance (EI) premium rates will drop by eight cents to $1.87 for employees (per $100 of insurable earnings) from the current rate of $1.95. The corresponding employer rate will drop by 11 cents to $2.62 from the current rate of $2.73. These EI changes represent a 4.1 per cent reduction from 2005 levels. (The maximum insurable earnings will remain unchanged at $39,000 for 2006.)

Employee EI Savings in 2006 – Select Incomes

Income 2005 2006 2006 Employee Employee EI Savings Contribution Contribution (employee only)

$15,000 $293 $281 $12.00
$20,000 $390 $374 $16.00
$39,000 $761 $729.30 $31.70
(or more)
CTF calculations.

Unfortunately, the net payroll tax bill will increase because EI reductions will be gobbled up by the Canada Pension Plan payroll tax. CPP premium rates (per $100 of insurable earnings) will remain unchanged at 4.95 per cent paid by employees and 4.95 per cent paid by employers. Yet because the threshold will increase to $42,100 in 2006 from today’s $41,100 level, workers will pay $50 more in CPP taxes next year. (See Chart 2 for 2006 and historical payroll tax changes: http://www.taxpayer.com/pdf/2005_Payroll_Taxes.pdf)

And There is More to Come…

The two major political parties – the governing Liberals and opposition Conservatives – have each promised to lower taxes if elected on January 23rd. Prime Minister Paul Martin has said he will lower income taxes on the middle class – although has yet to provide any details. Opposition leader Stephen Harper will reduce the 7 per cent GST to 5 per cent, and he has also hinted at additional income tax relief. There are few votes to be won by way of higher taxes: Even New Democrat leader Jack Layton says his party will not raise taxes.

“Voters need to nail down the Liberal and Conservative tax reduction proposals before Election Day. Yet the fact both major parties are talking about tax cuts is good news for overtaxed Canadians,” continued Williamson. “This is mainstream recognition that Canadians have been suffering under an unnecessarily high tax burden.”

Why Suffering Taxpayers Need a Break –

Structural over-taxation occurs when a government consistently collects more revenues than it needs to meet its annual funding commitments. As Canadians have suffered from high taxes and income stagnation, government coffers have overflowed. Ottawa is running multi-year and multi-billion dollar surpluses. Studies have shown that after-tax household incomes have increased only 3.8 per cent in the last twenty five years while federal government revenues increased 372 per cent over the same period.

“The federal government is swimming in excess surplus money, while ordinary taxpayers have barely kept their head above water,” concluded Williamson. “A surplus is nothing more than over-taxation. It is high time for Ottawa to throw a lifeline and return surplus money back where it belongs, to Canadian taxpayers.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Accountability for Indian Affairs

Many Canadians have come to realize that changes to Ottawa’s political structures and institutions are as important – and perhaps even more so – than the representatives that will be elected to Parliament on January 23rd. The Canadian Taxpayers Federation will release seven commentaries during this campaign that focus on broad themes of accountability, systemic and democratic reform measures. This second commentary in the series is written by the CTF’s Aboriginal Division director Tanis Fiss on the subject of increased accountability for Canada’s Indian reserves. Tanis is available for media interviews or comment on this subject by calling 403-263-1202 or e-mailing her at tfiss@telus.net.

December 14, 2005

Accountability for Indian Affairs

One well known definition for insanity is doing the same thing over and over again expecting a different result. Canadians have witnessed this in the delivery of Indian affairs. Regrettably, Ottawa’s insanity is not likely to stop without our lawmakers first making a number of elementary reforms.

Canadian taxpayers spend approximately $10-billion each year, for federal and provincial programs for native Canadians. Regrettably, for both natives and taxpayers there is little to show for all the spending. The status quo is failing. Fortunately, change can provide new hope.

According to auditor-general reports, 80 per cent of the Department of Indian Affairs’ total expenditures are transferred directly to native bands. How these funds are disbursed is decided by the Chiefs and their band councils.

Accountability on native reserves is lacking today, but there are ways to solve that problem. One possibility is to have native governments collect taxes in the way other levels of government collect taxes: through income taxes, property taxes and a multitude of other measures.

To increase accountability, the payments currently transferred to native band councils should be re-directed to individuals. The money necessary for native governments could then be taxed back by the local native government. To ensure appropriate community support, this recommendation should be implemented on a pilot basis on one or more reserves over a set time-frame. That way the policy, if successful, can be expanded to other reserves.

Currently, once the federal government transfers money from federal departments to native bands, the auditor-general of Canada no long has the authority to audit how and where the money is spent. No checks and balances on tax dollars foster inefficiencies, redundancies, corruption and even abuse.

If the ultimate ambition is to eventually have all Canadians treated with the same rights and responsibilities, then creating another separate auditor’s office – as is being proposed – will not be the best route to achieve that important goal or ensure the best use of tax dollars. Expanding the existing auditor-general’s mandate to include native bands would instead require fewer tax dollars to operate due to the economies of scale. Moreover, the standard of audits, mandates and scrutiny would remain consistent.

The Canadian Taxpayers Federation (CTF) routinely receives calls from native Canadians either frustrated with their local council or with the Department of Indian Affairs. This is because, in part, the delivery of programs is in the hands of a few – the Chief and council.

Since there is little separation between politics and administration on reserves – and there is no requirement to do so – activities on a reserve that are related to band administration is often heavily politicized. This scenario provides the Chief and council with tremendous power and control over community members. Access to Information documents obtained by the CTF show in 2003, the Department of Indian Affairs received 297 allegations of corruption, nepotism or mismanagement by native band councils.

As an interim measure to ensure native Canadians receive appropriate redress, an independent ombudsman for aboriginal affairs needs to be established. The ombudsman would have authority to investigate complaints and propose changes to be made in a band’s administrative practices or the administrative practices of the Department of Indian Affairs. If the band or department fails to make the recommended changes, a report would be brought before Parliament.

Some might say such changes will lead to “cultural genocide.” Such overblown rhetoric has no merit. When native Canadians are enabled to succeed in the same way as other Canadians, they will be no less Cree, Mohawk or Ojibwas. In fact, by doing so, they will render the entire paternalistic mechanism of the Indian Act, and the Department of Indian Affairs irrelevant.

Regardless of who wins the election, the federal government must reform aboriginal affairs. It is only through major reform that aboriginal poverty on reserves will truly be eradicated. To do otherwise is insane. Even worse, it consigns many aboriginal Canadians to live in poverty and in despair.

Tanis Fiss is director of the Canadian Taxpayers Federation’s Aboriginal Division located in Calgary, AB.

John Williamson
Federal Director
Canadian Taxpayers Federation

Taxes becoming a big election issue

It would appear that Stephen Harper and the Conservatives want to make taxes a big election issue. Last week the Conservatives offered up their plan to chop the GST from 7% down to 5%. You can also find Conservative campaign advertisements where Harper criticizes the Liberals for "over taxing Canadians" over the past twelve years.

This week the Conservative Party released its Opportunity Plan for Small Business, a package that will lower small business taxes and create apprenticeship positions. The plan will raise the threshold for the small business tax rate from $300,000 to $400,000 and reduce the small business tax rate from 12 per cent to 11 per cent over five years.

Meanwhile on the Liberal web site, the party is promoting its success in developing a strong Canadian economy over the past 12 years and in delivering eight consecutive balanced budgets. Yet the tax issue also figures prominently:

"The Liberal government is committed to providing tax relief - putting more money in the hands of Canadians and making Canadian businesses more competitive. To create the right investment for future prosperity, our government recently announced a new tax reduction plan that will deliver more than $30 billion in personal and corporate tax relief over the current year and the next five years. The majority of this, 95 per cent, , will go to individual Canadians – especially low- and modest-income Canadians."

Looks like we can look forward to both parties duking it out over the next month with election promises of both increased spending and tax cuts.

Whistleblowers: our last line of defense

Many Canadians have come to realize that changes to Ottawa’s political structures and institutions are as important – and perhaps even more so – than the representatives that will be elected to Parliament on January 23rd. The Canadian Taxpayers Federation will release seven commentaries during this campaign that focus on broad themes of accountability, systemic and democratic reform measures. This first commentary in the series is written by the CTF’s British Columbia director Sara MacIntyre on the subject of whistleblower legislation. Sara is available for media interviews or comment on this subject by calling 250-388-3660 or e-mailing her at smacintyre@telus.net.

December 8, 2005

Whistleblowers: our last line of defense

The conclusions of the Gomery Report should not only shock Canadians but also propel us into action. Instead of just asking how could this have happened, we should be asking, how can we prevent it from happening again? In addition to scrapping partisan slush funds like sponsorships, advertising, polling and corporate welfare, Canada needs to implement a workable whistleblower law.

Justice Gomery referred to a “culture of entitlement” that characterized the Sponsorship scandal players. This attitude of arrogance resulted in reporting requirements skirted, guidelines sidestepped and the public trust usurped. The point is that there were rules, regulations and reporting requirements in place when the Sponsorship scandal was orchestrated. That is why it is critically important to offer protection to civil servants, who are the public’s last line of defense, when all other systems fail. Civil servants are the final check of accountability in a system that has thrived upon secrecy.

Whistleblower protection has been talked about in Ottawa for years. It has been studied, reported on and recommended. Almost two-thirds of all OECD countries have some sort of protection for civil servants who expose illegal, wrongdoing, maladministration, waste or fraud within government and/or bureaucracy. Canada, despite having a whole host of examples to demonstrate why we need such protection just recently passed what has been widely condemned as fundamentally and fatally flawed whistleblower law.

One of the biggest failures of the law is that it requires the whistleblower first seek resolution within their own department. Such a provision is absolutely laughable. For example, it would have done nothing to protect the Sponsorship’s whistleblower, Allan Cutler.

Cutler worked with the infamous bureaucrat Chuck Guite in 1994. They both handled advertising and public opinion research in Public Works. Guite- who allegedly had the vanity license plate “gravy”-- began to interfere with some files and contracts. Cutler noted several contracting irregularities and refused to sign off on them. He submitted his concerns to both his department supervisor and to the internal audit branch. Cutler was demoted while Guite continued to move up and eventually headed what we now know as the Sponsorship program.

The new law would have done nothing to protect Allan Cutler who did report problems to his department head only to be punished with a demotion. In fact, the new law includes a provision that prevents such disclosures be made public. So, taxpayers would have never known the name Alan Cutler or the wrongdoing he tried to expose. The legislation will do nothing to change the current culture in Ottawa and it will not protect those civil servants concerned with the public interest. It is nothing more than a paper tiger. And that’s not good enough.

The Conservative Party’s “Accountability Plan” addresses the weaknesses of the current whistleblower law and provides several remedial measures including: giving an independent office the power to enforce compliance, disclosure of information revealed by whistleblowers and has even added a monetary incentive for those that expose wrongdoing or save taxpayers dollars.

There are plenty of international models of whistleblower protection to choose from and although a well crafted bill may prove embarrassing for any sitting government, legislators must remember they are there to represent and safeguard the public’s interest—not their own. Model whistleblower legislation would include: more than one reporting avenue, an independent investigation branch and a separate mechanism that handles complaints against employer reprisals.

Critics have argued that such protection would result in disgruntled employees making false or self-serving claims. There are plenty of ways to mitigate illegitimate claims. In Australia for example, it is a punishable offence to purposefully make false claims.

There are lots of models to choose from and countless reasons to institute effective whistleblower protection. Hopefully, frustrated voters making their voices heard this election campaign will create the political will to make it happen. Accountable and transparent government requires no less.

Sara MacIntyre
British Columbia Director
Canadian Taxpayers Federation

Conservatives propose cutting GST to 5%

As they prepare for the upcoming federal election, Stephen Harper and the federal Conservative party have proposed cutting the Goods and Services Tax by 2% down to 5% from the current 7% tax.

Long controversial since it was implemented under the Mulroney government, the GST was once promised to be scrapped by the Liberals. As irony would have it, now Paul Martin and the Liberals are in a position of having to defend the GST and its 7% rate in responding to the Conservatives election tactic.

The text of the Conservative's promise can be found on the Conservative Party web site: "Stephen Harper to cut the GST to five per cent".

The Liberal Party response can also be found online: "Harper Tax Proposal Wrong for Canadians"

At the time of writing, there were no responses to the proposed GST cut on either the Bloc Quebecois or the NDP web sites.

Liberal Government’s Pre-Election Spending Bender

Liberal Government’s Pre-Election Spending Bender – Largest in Canada’s Electoral History

Ottawa: From November 3rd to November 25th, the Canadian Taxpayers Federation (CTF) tracked 145 pre-election spending announcements totaling $24.5-billion made by Paul Martin’s Liberal government. Last week alone – November 21st to November 25th – the federal government’s spending binge topped $20-billion, unveiled in ribbon-cutting ceremonies and news wire stories across Canada.

“Announcing $24.5-billion in spending over 23 days works out to more than $1-billion per day or $44-million every hour,” observed CTF federal director John Williamson. “With the federal government budgeted to spend $163.7-billion on all programs in fiscal 2005/06, $24.5-billion represents 15 per cent of the entire fiscal year’s planned expenditures.”

The CTF estimates that half of these announcements represent new spending not included in either the 2005 Budget or the 2005 Economic Update released on November 14th. Further, most of the spending is being announced in swing ridings where the Liberals are vulnerable and where the electoral battles are tight between government members and the opposition parties.

Some of the spending gems include:

$332,528 for assisting Quebec’s blueberry industry.
$139,000 for fish harvesters skills promotion in Halifax, Nova Scotia.
$276,000 for the Bata Shoe Museum in Toronto, Ontario.
$361,666 to put synthetic turf on a soccer field in Longueuil, Quebec.

For a complete breakdown of the CTF’s “Spend-O-Meter” go to:

http://www.taxpayer.com/pdf/Liberal_Pre-election_Spending_promises.pdf

“Politicians used to throw salt pork at voters to win their support in an election,” concluded Williamson. “Today’s scheme is simply using tax dollars and the government’s spending powers for blatant electioneering. The federal government has embarked on the largest pre-election spending spree in Canadian history.”

John Williamson
Canadian Taxpayers Federation

Finance Minister Tables Notices and Amendments

On November 17, 2005, the federal Minister of Finance tabled several amendments concerning both income tax measures and GST/HST changes. Several of the amendments are retroactive.

From the Finance Canada web site:

Minister of Finance Tables Notice of Ways and Means Motion for Remaining Budget 2005 Income Tax Measures 2005-081 (November 17, 2005) - Includes a Backgrounder and Notice of Ways and Means Motion to Implement Certain Provisions of the Budget Tabled in Parliament on February 23, 2005 - 2005-11-17.

Minister of Finance Proposes Amendments Concerning the Income Tax Treatment of Certain Expenditures
2005-080 (November 17, 2005) - Includes Backgrounder and Notice of Ways and Means Motion to Amend the Income Tax Act - 2005-11-17.

Proposed GST/HST Amendments Relating to the Financial Services Sector
2005-079 (November 17, 2005) - Includes Legislative Proposals, Draft Regulations and Explanatory Notes Relating to the Excise Tax Act - 2005-11-17.

Investors reminded to exercise caution concerning donations

CRA Taxpayer Alert: Potential investors reminded to exercise caution with respect to certain donation arrangements

The Canada Revenue Agency has released a taxpayer alert reminding investors "that the proposed legislative changes announced by the Department of Finance on December 5, 2003, to limit the tax benefits of charitable donations made under tax shelter and other arrangements, are in effect."

Given that investors may see an increasing number of advertisements for tax shelter donation arrangements as the calendar year end approaches, potential investors should take caution.

"Investors should be aware of the risks associated with participating in certain tax shelter donation arrangements, including gifting trust arrangements, leveraged cash donations, and buy-low, donate-high arrangements. The CRA previously alerted investors about these risks in November 2003 and again in November 2004, advising investors to take a number of precautions to protect their interests."

For the full Taxpayer Alert, see the CRA web site at:
http://www.cra-arc.gc.ca/newsroom/alerts/2005/a051122-e.html

Revenue Minister McCallum launches Taxpayer Alert

The Minister of National Revenue has launched the Taxpayer Alert initiative as part of the CRA's efforts to inform Canadian taxpayers.

According to the CRA news release:

"The Taxpayer Alert initiative further supports this principle by providing Canadian taxpayers with a central repository of information about such things as tax shelters, tax havens, the underground economy and enforcement activities, as well as warnings about tax avoidance and tax evasion schemes. It also alerts taxpayers to the risks they are exposed to by hiring contractors who work in the underground economy."

The news release is available at:
http://www.cra-arc.gc.ca/newsroom/releases/2005/nov/nr051114-e.html

Additionally, the news release provided the following Tax Alert and Fact Sheets:

Taxpayer Alert:

Owners of self-directed RRSPs should use caution with tax-free withdrawal schemes
http://www.cra-arc.gc.ca/newsroom/alerts/2005/a051110-e.html

Fact Sheets:

Be an informed donor
http://www.cra-arc.gc.ca/newsroom/factsheets/2005/nov/fs051110-3-e.html

You have rights!
http://www.cra-arc.gc.ca/newsroom/factsheets/2005/nov/fs051110-e.html

Fairness provisions in the Income Tax Act and the Excise Tax Act
http://www.cra-arc.gc.ca/newsroom/factsheets/2005/nov/fs051110-2-e.html

Taking the Spin Out of the Economic and Fiscal Update:

The Canadian Centre for Policy Alternatives (CCPA) has released "Taking the Spin Out of the Economic and Fiscal Update: A Guide to the Numbers" by Ellen Russell.

From the CCPA news release:

Monday’s Economic and Fiscal Update is animated more by politics than economics. In the present political circumstances the temptation for the Liberals to massage their financial disclosures in a manner consistent with their pre-election strategy is great.

A new report, released today by the Canadian Centre for Policy Alternatives, provides Canadians with tools to decode the spin. Authored by CCPA Senior Economist Ellen Russell, the report helps journalists and others examine the plausibility of the government’s numbers by providing:
- an assessment of how big the current year’s surplus should be;
- an indication of budget surpluses for future years;
- pointers on how to tell whether the government is spending as much as it seems to be;
- a reality check for the plausibility of revenue and expenditure estimates.

The full report is available from the CCPA web site at http://www.policyalternatives.ca

CRA interest rates for 4th calendar quarter

The Canada Revenue Agency issued the following news release regarding annual interest rates applying to tax amounts owing.

"The Canada Revenue Agency (CRA) today announced the prescribed annual interest rates that will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates are calculated quarterly in accordance with applicable legislation and will be in effect from October 1, 2005, to December 31, 2005."

For the interest rates charged on overdue income and other taxes, please see the CRA web site at:

http://www.cra-arc.gc.ca/newsroom/releases/2005/sep/nr050902-e.html

Does Canada Have an Official Opposition?

Conservative leader silent on gas taxes, surplus update, daycare and smaller government.

Lost opportunity to advance taxpayers’ interests.

Ottawa: The Canadian Taxpayers Federation (CTF) today reacted to Conservative leader Stephen Harper’s failure to articulate public policies on his summer tour of Canada. "The leader of the Official Opposition has been invisible this summer," said CTF federal director John Williamson. "The public is listening for a clear voice, rather than an echo, to challenge the status quo in Ottawa. No federal politician is championing the need to cut gas taxes as a way to offset rising pump prices, or the importance of reducing Ottawa’s multi-year, multi-billion dollar surpluses with income tax relief."

With a general election to be called 30 days following the release of the Gomery Inquiry report, the CTF is pressing the political parties to adopt taxpayer friendly policies. Until the federal campaign is underway, the minority Parliament presents numerous opportunities for opposition members to influence government legislation. The priority of the CTF is to advocate for lower taxes, less waste, and more accountable government. Regardless of where an MP sits in the House of Commons, the CTF will highlight political parties and party policies that are out of touch with the common sense of ordinary taxpayers.

Gas Taxes:

Gasoline prices have jumped to a weekly average price of over 93 cents per litre, and have surpassed $1 a litre in many parts of Canada. "Because of the Liberal government’s support for the Kyoto Protocol, Ottawa is unlikely to reduce gas taxes unless faced with significant public and political pressure before the election," noted Mr. Williamson. "Public pressure is certainly out there, but where are Mr. Harper’s Conservatives? It is time to loudly demand removal of Ottawa’s ‘deficit elimination’ gas tax, and end the practice of applying GST to gas taxes."

Growing Surplus and Tax Relief:

The federal surplus, in fiscal year 2004-2005, is estimated to be $8-billion, which is $5-billion higher than the Liberal government predicted in the last budget. "The Official Opposition’s response to the surplus news was to offer a critic of Ottawa’s accounting methods," said Williamson. "The party leadership should be shouting from rooftops that it is time to end Ottawa’s over-taxation of Canadians with broadly based tax cuts, not another costly budget written by the NDP."

More Efficient Government:

It was reported in the Globe & Mail last week that Ottawa is proposing a shakeup of the public service that could eliminate tens of thousands of redundant jobs and save between $2-billion and $4-billion a year. The size of the federal public sector has ballooned to levels that existed before the deficit was eliminated. The Conservative Party issued a release denouncing the measures and for leaving "public servants feeling insecure about their futures, and [damaging] morale." "We thought the Conservative Party favoured making changes to create a smaller, more efficient government and provide government services at less cost to taxpayers. Apparently, we were wrong," said Williamson. "The party instead appears to now support an ever-expanding state."

Daycare:

Maclean’s reported in its June 29th edition the Conservative Party will unveil its new daycare policy to provide parents with greater choice – primarily with some level of financial assistance for stay-at-home parents – than the Liberal proposal, which is to only fund regulated daycare service. The magazine reported the announcement would come "in the next few weeks." No announcement has been made.

Corporate Welfare:

The Conservative Opposition no longer opposes the practice of handing tax money to businesses and other so-called “economic development" schemes. "The party simply wants corporate welfare programs, like Technology Partnerships Canada, to be more transparent and accountable," stated Williamson. "And sources tell us the party is now considering altogether abandoning its vow to critically review Ottawa’s regional development agencies, like ACOA, in advance of the next election campaign."

"Taxpayers want a voice, not an echo in Parliament. Mr. Harper is not advancing a credible vision to challenge the government’s tax-and-spend agenda. His summer of silence has not helped advance taxpayers’ issues and some party pronouncements are out of step with what taxpayers want from government, which is a well-organized bureaucracy," concluded Williamson. "In a minority Parliament there are many opportunities to advance taxpayer friendly policies and the Official Opposition should be taking advantage of them."

John Williamson
Canadian Taxpayers Federation

Painful Gas Taxes

Blame Government for Pain at the Pumps

Ever feel like placing a 9-1-1 call to report a robbery whenever you pull up to the pumps? Gasoline prices have now jumped to a weekly average price of over 90 cents per litre, and have regularly surpassed $1 per litre in many parts of the country.

The pump price motorists pay can be broken down into four components: crude oil costs, refining costs, retailer's profit margin and gas taxes. Depending on the province, gas taxes represent between 30 and 43 per cent of the pump price. On average, taxes account for about 38 per cent of the pump price.

Alberta has one of the lowest provincial gas tax rates at 9 cents per litre. Vancouver’s provincial/municipal gas tax is a whopping 20.5 cents a litre. Quebec’s provincial levy is 15.2 cents/litre, plus motorists pay a 7.5 per cent sales tax on gas, and Montreal drivers are whacked with an additional 1.5 cent tax on each litre of gas they buy. Down east, Atlantic Canadians are hit mighty hard by the 15 per cent Harmonized Sales Tax (HST) at the pumps.

The original argument for imposing higher gasoline taxes was to curb consumption. But consumption has chugged along and so has governments’ tax take. Between 1985 and 2003, gasoline sales steadily increased at an average rate of just over one per cent per year. According to Statistics Canada, retail gasoline sales in 1985 were just over 32 billion litres and just over 40 billion litres in 2004.

In fiscal 2004-2005, the federal government collected $4.5-billion in combined federal gasoline and diesel taxes, an 18 per cent increase over what was collected ten years earlier. One explanation for the rise is the steady increase in gasoline tax rates. The federal gasoline levy increased 567 per cent between 1985 and 1995 – from 1.5 cents per litre to 10 cents per litre.

Many of these tax hikes were sold to Canadians as a way to reduce the federal deficit. In 1995, the year Ottawa’s gasoline tax jumped from 8.5 to 10 cents per litre the hike was labeled a “deficit elimination measure” by then-Finance Minister Paul Martin. Canada’s deficit was vanquished in 1997-1998, but the tax remains and the federal government’s gouging at the pumps continues even with multi-year, multi-billion dollar federal surpluses.

Another contributor to growing federal gasoline tax revenues is the GST and HST (paid in New Brunswick, Nova Scotia and Newfoundland & Labrador). The GST and HST are charged on the full pump price, gasoline taxes included. It is a tax levied on the other gas taxes. And as pump prices climb, Ottawa rakes in even more GST revenues. Between 1996-1997 and 2004-2005, GST revenues from gasoline sales increased from $909-million to $1.2-billion – a 31 per cent increase! At current price levels, the federal treasury will likely pump another $175-million over the next year — bringing total GST revenues from gas to over $1.35-billion.

It is time Ottawa end its gas gouging. This can be accomplished with three easy steps. First, Ottawa should end its GST/HST tax on tax bite. This will lower the price, on average, by 1.5 cents a litre. Next, scrap the deficit elimination tax, which will save another penny and a half. Lastly reduce the federal levy by 2 cents, bringing the total saving to motorists to a cool 5 cents a litre.

Canadians unhappy about gas prices should blame the government – particularly the rascals in Ottawa – because they have the ability to lower taxes. With crude prices and consumption predicted to climb, it is time the federal government give motorists a break at the pump.

John Williamson
Canadian Taxpayers Federation

"Inflict Pain"

Academia's Recipe for Recession a la Kyoto

Two Ontario university academics have offered their prescription on how to ensure Canada meet its Kyoto obligations. It is, they write, to "inflict pain" on businesses and individual Canadians. In the summer edition of Policy Options, a magazine dedicated to examining policy quagmires, the University of Toronto's Douglas Macdonald and Debora VanNijnatten from Wilfrid Laurier University call on Ottawa to get radical.

"What kind of pain is called for," they ask. For starters, the pummeling of Alberta's oil industry, binding emissions-reduction quotas, and a job-killing 150% increase in the amount of emissions that businesses are required to make. Next they want higher gas prices and costlier home energy bills to reduce business and individual oil consumption. They conclude that "infliction of such pain is politically viable."

How easy it must be to call for inflicting economic pain on businesses and taxpayers – all from the cozy, tenured confines of the ivory tower. Tenure exists to ensure academic freedom. But the disregard for the wellbeing of Joe Sixpack and Jane Lunchbox – ordinary Canadians – by these academics is astounding. Callously imposing hardship on a people is normally the domain of repressive dictators.

In the 1950s, William F. Buckley, who is perhaps the most important figure in modern conservatism, took aim at faddish leftist ideology embraced by university faculties but at odds with the values of average Americans: "I would rather be governed by the first 200 names in the Boston phone book, than by the Harvard faculty." Fifty years on, Mr. Buckley's rebuke of academia still rings true.

But such thinking clearly drives Ottawa's Kyoto program. The Kyoto Protocol commits Canada to reduce average carbon dioxide emissions to 6% below 1990 levels by 2010. This might not sound like much. But because the country's output of greenhouse gases has increased by 30% since 1990, crippling cuts in energy output are necessary to comply with the international agreement. The retail price of gasoline, for example, will need to rise by as much as 50% to curb consumption.

Industry Minister David Emerson was forced to admit in April that Canada will need to buy emission credits from developing countries. Many economists and environmentalists regard this as purchasing "hot air" since nations that sell surplus gases need not reduce their current CO2 output levels. The result is Canada will continue to pump out emissions and claim victory while it pays foreign governments for credits. This is absurd public policy.

More recently, the Environment Ministry bypassed Parliament and issued a regulatory notice for a carbon tax. Fines start at $200 per excess tonne. This policy change signals Ottawa's intention to penalize companies that engage in routine economic activities. The tax will negatively affect all Canadians.

The more Canadians learn about Kyoto – its foolish assumptions and skyrocketing costs – the less they like it. The 2005 budget stated that Kyoto would cost some $5-billion. When the climate plan was released two months later the cost had jumped to $10-billion. What does Ottawa have to show for this money? A costly implementation plan that even environmental groups say is unworkable. Hot air purchases, more taxes and ineffectual spending – it is no wonder the U.S. and Australia refused to ratify the treaty, and others, like Japan, say their targets will not be met.

Canada will not come close to hitting its reduction targets unless Ottawa is willing to trigger a made-in-Canada recession. If this sounds alarmist remember that emissions increase with economic growth. To roll them back means shrinking the economy or achieving negative growth. The economic term for 2 quarters of negative growth is a recession. Fewer jobs, an underperforming economy, and higher energy prices will result in household income dropping, in real terms, by $3,000 – annually – by 2010. Yet this is the medicine Kyoto fundamentalists are calling for.

John Williamson
Canadian Taxpayers Federation

Canada Child Tax Benefit - Monthly Payments

Did you know that the Canada Revenue Agency issues on a monthly basis The Canada Child Tax Benefit (CCTB), a tax-free monthly payment to eligible families to help them with the cost of raising children under the age of 18.

Payment for July 2005 was made on July 20, 2005 totalling more than $806 million to more than 3 million recipients across Canada. Recipients who are entitled to this benefit payment and have not received it by July 30, 2005 should contact the Agency's enquiry service at 1-800-387-1193.

The next monthly payment will be made on August 19, 2005. For more information see the Canada Child Tax Benefit section of the CRA web site.

The Disability Advisory Committee

The Canada Revenue Agency has announced that formation of the Disability Advisory Committee:

"Minister of National Revenue John McCallum announced yesterday, the creation of the Disability Advisory Committee to deal with the administrative aspects of the Disability Tax Credit and with implementing recommendations made by the Technical Advisory Committee on Tax Measures for Persons with Disabilities."

The Technical Advisory Committee on Tax Measures for Persons with Disabilities was created in 2003 to recommend ways of improving the fairness of treatment for persons with disabilities under the income tax system. All 12 committee members were appointed by Minister McCallum and come from different areas of the country representing diverse groups.

For more information see the news release on the CRA web site:
http://www.cra-arc.gc.ca/newsroom/releases/2005/july/nr050719-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

Budget 2005 affects on CRA

If you are wondering how the recent federal budget will affect Canada Revenue Agency and the Canadian tax regime, CRA has published a message from Minister of National Revenue John McCallum and two supporting documents on Expenditure Review Initiatives and Tax Legislation Changes.

Items of note include:
- additional funding to enhance CRA's work on compliance initiatives, including international tax compliance and tobacco enforcement
- additional funding for new jobs at the Agency.

The Agency's Expenditure Review Initiatives identifies where the CRA intends to save money and approximately how much over the next five years. The largest savings will be in reducing the cost of its corporate services operating costs, for a savings of $215 million over five years.

Other areas highlighted for savings including almost $80 million streamlining tax return processing; $20 million phasing-out counter service for cash payments; reducing client services delivery costs through the consolidation of call centres and the rationalization of counter services for enquiries for a savings of $44 million, and more.

For more information, see:
http://www.cra-arc.gc.ca/agency/budget2005/initiatives-04e.html

2005 Federal Budget Highlights

The Minister of Finance, Ralph Goodale, presented the 2005 federal budget on February 23. Somewhat driven by being a minority government, the budget proposes several tax cuts - most of them modest and phased-in over time. Some highlights include the following:

* increasing spending in many areas including the environment, health care, municipalities, and the military;
* reducing debt;
* sharing federal gas tax revenue with the municipalities;
* increasing the basic personal amount, albeit gradually, to $10,000 for 2009 (i.e. the amount of income a Canadian can earn tax-free);
* increasing personal credits in respect of a spouse or common-law partner or a wholly dependent relative;
* increasing Guaranteed Income Supplement benefits for low-income seniors;
* enhancing tax assistance for persons with disabilities and caregivers;
* eliminating the 30% foreign property limit on pension and registered retirement savings plan investments (a surprise move done "in the name of enhancing global investing");
* increasing the RRSP and RPP deduction limits;
* expanding the list of eligible medical expenses;
* introducing a 16% non-refundable adoption expense tax credit;
* eliminating the corporate surtax on January 1, 2008;
* reducing the general corporate income tax rate over several years - this will not apply to small business income or investment income of Canadian-controlled private corporations as they continue to be eligible for their own special tax provisions; and
* revising the previously proposed "reasonable expectation of profit" test as a result of public consultation.

There are several good links through which you can find general and detailed information as well as commentary on the budget.

Canada Revenue Agency
http://www.fin.gc.ca/budtoce/2005/budliste.htm

Certified General Accountants of Canada
http://www.cga-canada.org/budget2005/

Canadian Insitute of Chartered Accountants
http://www.cica.ca/index.cfm/ci_id/25160/la_id/1.htm

Many accounting firms and law offices will also have valuable insight into the budget.

Caren MacLeod
Scott Rankin & Gardiner
www.srgg.com

CTF Rates Federal Budget 2005

The Good, the Bad and the Ugly

*Personal income tax relief starts out measly, rises by 2009
*More money down the Kyoto sinkhole – Talk of green taxes
*Program spending in 2004/05 up 11.8% – Original target was 4.6%
*But Wait (a Little) More Good: Debt re-payment continues and federal gas tax revenue finally starts to flow to cities

Ottawa: The Canadian Taxpayers Federation (CTF) reacted to the 2005/06 federal budget, which was tabled in the House of Commons by Finance Minister Ralph Goodale this afternoon.

The Good: Tax Relief for Canadians

"Starting in 2006 Canadian taxpayers will have a little more money in their pockets thanks to a higher personal income tax exemption, but the initial tax savings is laughable although it will grow overtime," said CTF federal director John Williamson. "In 2006 an individual taxpayer’s personal income tax bill will be cut by a measly $16, but rise to $192 a year in 2009. The savings for two-income families will be $32 in the first year and $384 by 2009, whereas families with a stay-at-home spouse are slightly short-changed with savings of $30 in 2006 and $370 in 2009."

"Despite Ottawa’s multi-year and multi-billion dollar surpluses, which really represents an ongoing over-taxation of Canadians, the government is delaying until 2009 what is at best described as modest tax relief until 2010," noted Williamson.

The Bad: More Tax Money for Kyoto – Still No Plan

The federal government will continue its largely ineffective Kyoto Protocol strategy of spending billions of dollars. Budget 2005 commits $1-billion into a Clean Fund to encourage business to reduce greenhouse gas emissions; another $200-million will be dedicated to wind power; $300-million for the Green Municipal Fund; $225-million for home renovations; and $97-million on hydro development. More ominous for taxpayers is the potential shifting of strategies: The Case for Green Taxes (see annex four of the budget, page 314-327), in which the federal governments makes a public policy argument in favour of a green tax.

"Despite all assurances that any new taxes introduced that will be offset by taxes in other areas, taxpayers are deeply concerned this sort of rhetoric will result in new taxes and a higher tax burden for Canadians," said Williamson. "The CTF opposes a ‘green tax’ and will loudly oppose any new increase that does not include an equivalent reduction in other broadly-based taxes, for instance lower personal incomes taxes."

The Ugly: Budgets Not Being Followed, Spending Set to Shoot Up (Again)

Under Prime Minister Paul Martin, the Liberal government’s program spending (this figure excludes public debt charges) totaled $141.4-billion in 2003/04 (last year), it increased to $158.1-billion in 2004/05, and will jump to $161.3-billion in 2005-06. In addition, estimated gross surplus figures will be $3.0-billion this year, $4.0-billion in the coming fiscal year, and $5.0-billion in 2006/07.

"The government appears incapable of living within the budgets it has set for itself. For instance when the budget was tabled last year, Minister Goodale said program spending in 2004/05 would be $148-billion. When the Economic Update was delivered in November we were told it would, in fact, rise to $151-billion. And today the budget reveals spending in 2004/05 will be $158-billion. Ottawa missed its original budget target by an astounding $10-billion. This is not a government that is budgeting responsibly and its actions make a mockery out of future spending projections, which should be increased by at least a factor or two."

"Since the budget was balanced, program spending has risen 48 per and is projected to climb by 82 per cent in 2009/10," Williamson noted. "Mr. Martin’s spending still outpaces the combined growth of inflation and population growth, which breaks his own Budget 2000 pledge that spending will be limited to inflation and population growth."

More Good: The Debt & Surplus Picture

"We are pleased Minister Goodale will reduce the debt by $4-billion this year," Williamson stressed. "And we applaud the federal government for reducing more than $60-billion in net debt over the past 8 years. Unfortunately the government has again refused to implement a legislated debt reduction schedule. Debt servicing will chew up $35-billion this year, an astonishing 20 cents of each dollar collected. Ottawa should set yearly debt reduction targets as was done with the deficit and make those targets the law."

And a Little More Good: Infrastructure Initiatives — Cities & Communities Agenda

The 2005 budget will – finally – begin to share federal gas tax revenue with municipalities. Last year, Ottawa rebated the GST paid by city governments. In 2005/06, the share of the federal gas tax dedicated to cities and communities will be $600-million. By 2009-10, the share will increase to $2-billion, representing 5 cents per litre. Since 1999, the CTF has advocated dedicating half of the federal fuel tax revenue with all Canadian municipalities regardless of size. Ottawa collects approximately $5-billion in fuel taxes, yet returns a paltry 3 per cent to roads.

"Early in February the Infrastructure Minister John Godfrey announced Ottawa would allocate gas tax revenues on a per capita basis," noted John Williamson. "We completely agree with this approach because it treats all municipalities equitably and includes all cities, big and small alike. We believe the money should be used for infrastructure projects, highway maintenance and roads. The government appears to be doing what we have advocated on this file, and that’s good news for taxpayers."

John Williamson
Canadian Taxpayers Federation
www.taxpayer.com

The full text of this posting including tables and figures is available at:
http://www.taxpayer.com/main/news.php?news_id=1926

2005 Federal Budget

Scarcely half an hour ago, at 4:00pm EST, the 2005 Federal Budget documents became available on the Government of Canada Finance Department web site.

With the issues of the gun registry, sponsorship scandal, mad cow disease, SARS, the war in Iraq, and Kyoto still fresh in our minds, the Budget predictably responds with its stated priorities of maintaining sound financial management, securing Canada's social foundations, achieving a productive and growing economy, moving towards a green economy and sustainable communities, and meeting our global responsibilities.

Support for health care is re-emphasized in this budget as is further solidification of our role in international aid and assistance. New to this budget is a deal for Canadian communities, allowing them to share in the proceeds of the gas tax revenues. Job creation and innovation also play a role in the budget as money is allocated to invest in people, skills, ideas, and regional development. More than $10 billion is also dedicated to enhancing the quality of our air, land, and water through environmental programs.

The issue of tax primarily appears in the Budget's "A Fair and Competitive Tax System" found in "Chapter 4 - A Productive, Growing and Sustainable Economy".

Tax highlights include:

- improving tax assistance for persons with disabilities;
- increasing to $10,000 the limit Canadians may earn without paying tax;
- removing 860,000 taxpayers from the tax rolls, including about 240,000 seniors;
- proposing the elimination of the corporate surtax and reducing the general corporate income tax rate by 2%; and
- enhancing tax incentives for efficient and renewable energy generation equipment.

Budget 2005 claims that most of the tax benefits will go to low- and modest-income Canadians. (Over 70 per cent of the tax relief will go to those earning less than $60,000 per year.) While the Budget increases to $10,000 the limit Canadians may earn without paying taxes, the RRSP annual contribution limit is also raised to $22,000 by 2010. The question remains, how many low- and modest- income Canadians can afford to put $22k a year into their RRSPs?

Time and a closer examination of the Budget details will shed light on the benefits to Canadians of modest incomes. Over the coming days and weeks, we will no doubt see a flood of response, analysis, and critiques of the first budget delivered by a minority government in more than two decades. Stay tuned.

Full details of the 2005 Federal Budget can be found at:
http://www.fin.gc.ca/budtoce/2005/budliste.htm

Alternative Federal Budget 2005

In anticipation of this week's federal budget release, you might be interested in viewing an alternative budget. The Canadian Centre for Policy Alternatives has released its Alternative Federal Budget 2005.

A voice in public policy debates, the CCPA is an independent, non-partisan research institute concerned with issues of social and economic justice. The National (Ottawa) Office has three ongoing projects: the Education Project, the Trade and Investment Research Project, and the Alternative Federal Budget Project.

The Alternative Budget is the CCPA's way of offering a different opinion on how the federal budget -- that is, your tax dollars -- should be spent. In this year's Alternative Budget, the CCPA critizes the federal government's "U-shaped" budget surplus, that being one in which surpluses are projected in the current fiscal year, dropping off precipitously, and then recurring again somewhere down the road. Rather, the CCPA claims that the federal government has forseeable surpluses.

"The federal government will have an estimated $45 billion in surplus over the next three years – money that could significantly reduce poverty and inequalities in Canada and lay to rest overheated squabbles over cash transfers to the provinces, says the 2005 Alternative Federal Budget (AFB)."

The CCPA also critiques where the government is spending its dollars, indicating that the budget could do more to improve federal/provincial relations and make good on past promises to provide a more equitable split between deficit reduction and spending on social programs.

"In order to begin the critical process of rebuilding the federation and repairing fragile federal-provincial relations, the AFB would:

- assure adequate funding for the Canada Social Transfer (CST) by increasing funding for the transfer by more than $13 billion over the next 3 years;

- build in accountability and transparency by dividing the social transfer into separate Social Transfer and Post-Secondary Education funds and having a separate envelope for each social item within the CST; and

- attack poverty in Canada by increasing the Canada Child Tax Benefit, the GST credit, creating a national child care program, enhancing the EI program, creating affordable housing, increasing OAS and GIS benefits and providing significant funds to address the needs of Aboriginal communities."

For more information on the Alternative Federal Budget 2005 and the CCPA, please see:
http://www.policyalternatives.ca

Federal Budget Coming Feb. 23, 2005

Want to know how your tax dollars are being spent? Minister of Finance Ralph Goodale has announced that the federal budget will be tabled on February 23, 2005. The Minister will present the budget in the House of Commons at approximately 4:00 p.m. EST that day.

For more information, see:
http://www.fin.gc.ca/news05/05-010e.html

Creation of First Nations Advisory Committee

Recognizing the need to build new partnerships with First Nations, the CRA announced today the creation of an advisory committee aimed at supporting First Nations peoples in accessing benefits while recognizing their rights to certain tax exemptions.

From the Canada Revenue Agency web site:

Ottawa, February 1, 2005 -- Minister of National Revenue John McCallum and Assembly of First Nations (AFN) National Chief Phil Fontaine today announced the creation of a First Nations Advisory Committee (FNAC) to help the Canada Revenue Agency (CRA) identify and address tax and benefit administration issues affecting First Nations peoples.

For the full news release, see:
http://www.cra-arc.gc.ca/newsroom/releases/2005/feb/0201committee-e.html

CTF 2004/05 Pre-Budget Submission

The Canadian Taxpayers Federation has issued its 2004/05 pre-budget submission to the Commons Finance committee. It is available at:

http://www.taxpayer.com/pdf/2005-06_Federal_Pre-Budget_Submission.pdf