[Canada] Canadian Politics Redux

[viper37]

I need to read more about that.

they are raising the exemption threshold so that is good.
They are taxing more the sale of rentals and secondary homes, so that is good.

The rest, I'm not sure of what I'm reading.

This reminds me of the discussion in the UK thread.  The government has stated that they wish to create incentives for the creation of rental properties.  They cut the GST and increased amortization rates for those purposes.  Now taxing properties built for rental when sold seems to run contrary to the policy objective of getting people to invest in the creation of more rental properties.  Why would I do that when I am going to be hit with a larger capital gains tax?  And again, realize that this is mainly corporations doing the building and now the inclusion rate just went up for them on the very first dollar of capital gain.

Corporations weren't building the units we need.

They weren't investing more when the exemption went from 75% to 50% under Chrétien and Martin (I had to double check, I thought it was under the Mulroney Conservatives).  Investments remained the same and productivity remained stable in some sectors, dipped in other.

What affect our productivity the most is our Canadian $.  It sucks, but we don't produce technology.  It's imported and mainly sold in US$, even when made in Asia.

I still have not read through the finer prints, so I am unsure if it affects everything like a business reselling a particular piece of equipment (or a building) after some years for more than its amortized value.  Medias only concentrate on secondary homes and business resale.  

Imho, going from 50% to 66% is not going to hurt productivity or investments a lot, most entrepreneurs do not go in it with the idea "I'm going to resell my business in 50 years and make a fuckton of cash at 50% tax rate".  Only in the tech sector would that mentality exists.

There is an increase for the exemption and that is a good thing, but it could be increased further, particularly for agriculturists who face high land value.

[viper37]

Now guess what, it is now deemed a bare trust, and we get to the pay the taxes on the account at my marginal tax rate!!!!

I would oppose that decision if I were you.  Having a joint account and power of attorney for someone who has trouble making his own financial payments is not the same has having a bare trust.  It is something I should know...  Granted, common law is different than our civil code.  Still...

You'll obviously need an accountant to help you sort this out, but the CRA is totally wrong on this.

[viper37]

I think it's 7k now? It's cumulative though, right? You can add in the current year any unused cap amount from previous years?

It varies from year to year. Usually around 5 000$, but Harper made it 10 000$ in 2015. It's 7000$ now and will be indexed to inflation and rounded to the nearest 500$.  And yes, it's cumulative.


TSFA

[viper37]

And remember this is not just about shares in a company, there a lot of properties throughout Canada that are about to change hands.  That will all be fully taxed in the hands of the beneficiaries after the 250k amount.  Which all properties in Canada.

My prediction:

The Conservatives will tear their shirts on this, campaigning on how Justin Trudeau hurt the economy.  They will form the next majority government.

In their first budget... They won't touch this new taxation measure.  All provinces have now followed suit.  They all want the money.  There is no turning back.  The Feds just gave them the perfect excuse: "We need to harmonize our taxation systems".

[Josephus]

If my government-run pension plan goes tits-up I'd be completely screwed.

but you know, or at least can be pretty comfortable in knowing, that it won't.

And I imagine you and your wife have, or will have, enough assets by the time you retire, that you won't be completley screwed.

For instance....you can likely downsize your home and move into a one bedroom apartment.

[crazy canuck]

I need to read more about that.

they are raising the exemption threshold so that is good.
They are taxing more the sale of rentals and secondary homes, so that is good.

The rest, I'm not sure of what I'm reading.

This reminds me of the discussion in the UK thread.  The government has stated that they wish to create incentives for the creation of rental properties.  They cut the GST and increased amortization rates for those purposes.  Now taxing properties built for rental when sold seems to run contrary to the policy objective of getting people to invest in the creation of more rental properties.  Why would I do that when I am going to be hit with a larger capital gains tax?  And again, realize that this is mainly corporations doing the building and now the inclusion rate just went up for them on the very first dollar of capital gain.

Corporations weren't building the units we need.

They weren't investing more when the exemption went from 75% to 50% under Chrétien and Martin (I had to double check, I thought it was under the Mulroney Conservatives).  Investments remained the same and productivity remained stable in some sectors, dipped in other.

What affect our productivity the most is our Canadian $.  It sucks, but we don't produce technology.  It's imported and mainly sold in US$, even when made in Asia.

I still have not read through the finer prints, so I am unsure if it affects everything like a business reselling a particular piece of equipment (or a building) after some years for more than its amortized value.  Medias only concentrate on secondary homes and business resale. 

Imho, going from 50% to 66% is not going to hurt productivity or investments a lot, most entrepreneurs do not go in it with the idea "I'm going to resell my business in 50 years and make a fuckton of cash at 50% tax rate".  Only in the tech sector would that mentality exists.

There is an increase for the exemption and that is a good thing, but it could be increased further, particularly for agriculturists who face high land value.

There are a number of stories in The Globe and Mail about how it is preventing a number of deals from going through And especially for an investor now getting cold feet because they returned, they thought they were going to get on their Canadian investments will now be taxed more heavily.

I run out of gift links and so you're going to have to subscribe to get the full story.

Now guess what, it is now deemed a bare trust, and we get to the pay the taxes on the account at my marginal tax rate!!!!

I would oppose that decision if I were you.  Having a joint account and power of attorney for someone who has trouble making his own financial payments is not the same has having a bare trust.  It is something I should know...  Granted, common law is different than our civil code.  Still...

You'll obviously need an accountant to help you sort this out, but the CRA is totally wrong on this.

Yeah, it didn't seem correct to me either and so we did get an opinion about what was happening. Unfortunately, it is all true.

Your understanding of what a bear trust should be is correct but the government has changed the definition.

It's almost like the government doesn't understand it's own tax policy 

[crazy canuck]

And remember this is not just about shares in a company, there a lot of properties throughout Canada that are about to change hands.  That will all be fully taxed in the hands of the beneficiaries after the 250k amount.  Which all properties in Canada.

My prediction:

The Conservatives will tear their shirts on this, campaigning on how Justin Trudeau hurt the economy.  They will form the next majority government.

In their first budget... They won't touch this new taxation measure.  All provinces have now followed suit.  They all want the money.  There is no turning back.  The Feds just gave them the perfect excuse: "We need to harmonize our taxation systems".

Looks like you are correct. Quebec wasted no time to follow along.  And it is hard to see how reducing the capital gains tax is a vote getter for the Conservatives in the next federal election.

[Grey Fox]

One of the few instances where the CAQ can accomplish something quickly.

[viper37]

Yeah, it didn't seem correct to me either and so we did get an opinion about what was happening. Unfortunately, it is all true.

Your understanding of what a bear trust should be is correct but the government has changed the definition.

It's almost like the government doesn't understand it's own tax policy 

That is strange.

I will have to inquire carefully about this with the tax specialist...

[viper37]

One of the few instances where the CAQ can accomplish something quickly.

When it comes to taxation, governments can be very efficient.

[viper37]

There are a number of stories in The Globe and Mail about how it is preventing a number of deals from going through And especially for an investor now getting cold feet because they returned, they thought they were going to get on their Canadian investments will now be taxed more heavily.

There are always going to be anecdotal stories like this.

Empirically though, we know that investments and productivity were unaffected by the drop from 75% to 50% back in the mid 90s.  The only thing that change is that very rich people became wealthier.  The middle class did not grow stronger as their gains mostly depended from their wages and whatever capital gains they acquired were mostly through their RRSPs (and now, their TSFAs).  There is a tax exemption for the first 971M$ of your business share sales.  That's a bit low, and it will be raised.  Could be higher too.


I'm not very afraid for the long term.  Tax specialists will develop strategies to avoid most of these and the investments will bounce back.

What I don't know is the effect it will have on rent.  I've no idea if rentors will increase their rent immediately rather than wait for an opportunity to make more cash upon the resale of their asset.  Or if it will have an impact on the price of said asset.

[Grey Fox]

Change is inevitable. This is all knee jerk reactions by wealthy people having the rug pulled under them. It happens.

I have no sympathy.

[viper37]

I have no sympathy.

I'm not very surprised. 

[crazy canuck]

There are a number of stories in The Globe and Mail about how it is preventing a number of deals from going through And especially for an investor now getting cold feet because they returned, they thought they were going to get on their Canadian investments will now be taxed more heavily.

There are always going to be anecdotal stories like this.

Empirically though, we know that investments and productivity were unaffected by the drop from 75% to 50% back in the mid 90s.  The only thing that change is that very rich people became wealthier.  The middle class did not grow stronger as their gains mostly depended from their wages and whatever capital gains they acquired were mostly through their RRSPs (and now, their TSFAs).  There is a tax exemption for the first 971M$ of your business share sales.  That's a bit low, and it will be raised.  Could be higher too.


I'm not very afraid for the long term.  Tax specialists will develop strategies to avoid most of these and the investments will bounce back.

What I don't know is the effect it will have on rent.  I've no idea if rentors will increase their rent immediately rather than wait for an opportunity to make more cash upon the resale of their asset.  Or if it will have an impact on the price of said asset.

All true, but most small businesses are sold by way of asset sales not by way of selling the shares of the company.  I confess I do not know all the ins and outs of how this change will apply to asset sales, but from what I am reading, that is something concerning a lot of small business owners.

[viper37]

The tv show is in French, but listen to Mark Carney's discourse (in English).

This is Prime Minister's material.  And I'd never consider voting for the LPC.  But still, that's a PM right there.

Right after the speech the hosts says that Carney "might want to replace Justin Trudeau" and Dimitri Soudas half jokes that "might" is one word too much in that sentence.


I really like Soudas too. It's a shame he's a Federalist, such a smart guy.


He later says that Liberal political advisors in the GTA are actively preparing for Mark Carney's campaign to the leadership of the party, but what Carney really wants is to be nominated at the head of the party, no leadership race.


Also, the Libs apparently hope to reduce their spread with the Cons by 5% every 6 months until the election is called.  I wish them good luck on that. They couldn't move the needle with their budget, I don't see them doing anything important enough to recapture their losses.