Personal Finance

Trudeau going after Personal Services Corps disguised as small businesses

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  • Apr 8th, 2022 5:08 pm
Deal Guru
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Mar 12, 2005
11677 posts
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Victoria
Is the logic that a principal residence tax, would give people less money to spend on the next place? Ergo the next place would cost less? Because people selling then buying, would have less means, lowering over all prices? I'm not 100% sure how much impact that would work.

I often wonder about CMHC itself. Removing the risk from Banks on high ratio mortgages, so people who wouldn't ordinarily be able to borrow could borrow. Thus creating bidding wars on real estate with even more borrowed dollars. Why don't we get rid of CMHC to try and bring prices down?
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Oct 7, 2007
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zod wrote: Is the logic that a principal residence tax, would give people less money to spend on the next place? Ergo the next place would cost less? Because people selling then buying, would have less means, lowering over all prices? I'm not 100% sure how much impact that would work.

I often wonder about CMHC itself. Removing the risk from Banks on high ratio mortgages, so people who wouldn't ordinarily be able to borrow could borrow. Thus creating bidding wars on real estate with even more borrowed dollars. Why don't we get rid of CMHC to try and bring prices down?
I am in support of smaller government which achieves two things:
1. It simplifies lfe for hardworking, taxpaying Canadians
2. It leaves more money in the pockets of hardworking, taxpaying Canadians

It seems that everything the government pretends to do for us, is really veiled under the agenda of growing larger and larger government which translates into more taxes for the little guy. This in turn makes it more costly for people to live, work, and do business.

I believe that a new tax is coming and will be marketed to the younger people who are more impressionable (did they finally pass lowering the voting age to 16?) to portray homeowners as a "rich" class who deserve to be taxed so that the government can make housing more affordable for those who want to own but are still struggling to own. But I would argue that almost every policy-decision to date that the government has made has made home ownership (and also renting) more unaffordable while driving up homelessness for people who live and work in our country. Do we really think a new tax is going to solve what is happening? We need an honest public education system to explain to the masses what is taking place with respect to housing costs and how we got here. If young people support such a tax, they will be helping to fulfill their own future of the "be happy and you will never own anything" agenda.
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Jan 23, 2018
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The Dawg Pound
choclover wrote: I am in support of smaller government which achieves two things:
1. It simplifies lfe for hardworking, taxpaying Canadians
2. It leaves more money in the pockets of hardworking, taxpaying Canadians

It seems that everything the government pretends to do for us, is really veiled under the agenda of growing larger and larger government which translates into more taxes for the little guy. This in turn makes it more costly for people to live, work, and do business.

I believe that a new tax is coming and will be marketed to the younger people who are more impressionable (did they finally pass lowering the voting age to 16?) to portray homeowners as a "rich" class who deserve to be taxed so that the government can make housing more affordable for those who want to own but are still struggling to own. But I would argue that almost every policy-decision to date that the government has made has made home ownership (and also renting) more unaffordable while driving up homelessness for people who live and work in our country. Do we really think a new tax is going to solve what is happening? We need an honest public education system to explain to the masses what is taking place with respect to housing costs and how we got here. If young people support such a tax, they will be helping to fulfill their own future of the "be happy and you will never own anything" agenda.
I have a huge problem with this creeping idea that we somehow need to eliminate the principal residence exemption and start taxing everybody on increases in their home's "value".

First and foremost, that would mostly represent a tax on inflation, inflation that the government itself created by endlessly printing money. Inflation is a big enough artificial tax as it is.

Secondly, in contrast to the USA approach e.g., one of the reasons we even have a PRE is that mortgage interest is not deductible. Eliminating just the one side of that tax policy balance would be egregious
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Oct 7, 2007
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threadhead wrote: I have a huge problem with this creeping idea that we somehow need to eliminate the principal residence exemption and start taxing everybody on increases in their home's "value".

First and foremost, that would mostly represent a tax on inflation, inflation that the government itself created by endlessly printing money. Inflation is a big enough artificial tax as it is.

Secondly, in contrast to the USA approach e.g., one of the reasons we even have a PRE is that mortgage interest is not deductible. Eliminating just the one side of that tax policy balance would be egregious
Totally agree.

Why the cost of housing has never been factored into the inflation calculation makes no sense. Everyone needs some where to live regardless of whether they own or rent. How is inflation, as the government defines it, a true measure of the change in cost of living if housing costs are ignored?

I also agree that elimination the PRE for the reason of bringing in tax laws is flawed from so many points of view.

Why can't the government work within the current level of taxation dollars it currently collects? How much bigger does it need to grow? Where will this end? All rhetorical questions, of course.
Deal Addict
Nov 13, 2013
4520 posts
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Ottawa
threadhead wrote: I have a huge problem with this creeping idea that we somehow need to eliminate the principal residence exemption and start taxing everybody on increases in their home's "value".

First and foremost, that would mostly represent a tax on inflation, inflation that the government itself created by endlessly printing money. Inflation is a big enough artificial tax as it is.

Secondly, in contrast to the USA approach e.g., one of the reasons we even have a PRE is that mortgage interest is not deductible. Eliminating just the one side of that tax policy balance would be egregious
Not that we should emulate US tax policy but mortgage is not really deductible. It come in lieu of a standard deduction which was doubled under Trump. So unless you have a lot of Charitble or other deductions you won’t claim and even then marginally it’s a small gain.
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Oct 7, 2007
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fogetmylogin wrote: Not that we should emulate US tax policy but mortgage is not really deductible. It come in lieu of a standard deduction which was doubled under Trump. So unless you have a lot of Charitble or other deductions you won’t claim and even then marginally it’s a small gain.
Doesn't US tax law also allow for the deduction of property taxes up to a certain amount, like $10k or something like that?
Deal Fanatic
Nov 24, 2013
6479 posts
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Kingston, ON
choclover wrote: Doesn't US tax law also allow for the deduction of property taxes up to a certain amount, like $10k or something like that?
It's called "SALT." State And Local Tax deduction. $10,000 maximum, but you do have to be itemizing deductions (rather than claiming the standard deduction) to get it. Useful for some now but not everyone.

https://www.daveramsey.com/blog/state-a ... es%20taxes.
Deal Addict
Jan 18, 2014
1537 posts
512 upvotes
Rouyn-Noranda
choclover wrote: Still spending whatever time it takes to be compliant with following all the rules. In some cases we have just stayed away from participating in programs like those related to COVID because we are not interested in participating in programs where the rules keep changing and we would be adding additional layers of compliance to our workload.
But the rules you're following are to benefit from the more favourable small business tax rate, right? So you're not really the victim you're portraying yourself to be, you're just doing what it takes to keep more money, as any reasonable person would, right?

What do you think of the policy idea of doing away with the small business tax rate entirely?
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Oct 7, 2007
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John47 wrote: But the rules you're following are to benefit from the more favourable small business tax rate, right? So you're not really the victim you're portraying yourself to be, you're just doing what it takes to keep more money, as any reasonable person would, right?

What do you think of the policy idea of doing away with the small business tax rate entirely?
I think bigger picture I would like to see government put in policies that are more business friendly. Small businesses are the lifeblood of our economy. They create jobs, they contribute taxes and they create interesting communities in which to live and enjoy.

All I have seen over the last several years are policies that are killing small businesses.

A country whose primary industry is government and government-related organizations is not a healthy vision for any country. Yet, this is where Canada is heading.

Sure, go ahead and kill the small business tax rate. You could even charge small businesses more tax than larger corporations, while you're at it. It just really depends on what kind of country you want you and your kids to live in for the future.

BTW, the term "victim" is not really part of my vocabulary and I don't imagine most people in small business would consider themselves "victims" because anyone who rushes to this type of thinking is probably does not have the emotional intelligence required to effectively run a small business. Small business owners take on great risks and incur great expense with the optimism of realizing a profit but there are no guarantees like people get when they work in a government job where people typically earn much more than private industry would pay for the same person in an equivalent job. Perhaps it is this lack of respect for the people who form this sector of our economy that is causing it to be eroded in our society. However, the same people that knock these people fail to understand where the taxes that fund their salaries actually come from.
Sr. Member
Jan 18, 2017
607 posts
527 upvotes
AB
I see it with all of the businesses I deal with. My tongue-in-cheek advice these days to people kicking around starting a business is always "Go work for someone else. It's less stressful, less headache, you make more money, and you get free CPP."

To use an anecdotal case, I'll use me. If I'm a new CA grad, I could look at starting my own small firm. Then, I have to deal with office leases, office equipment, staffing costs/expenses, staff drama, liability insurance and possibly getting my ass sued off, ongoing PD costs, always on call, live at the office during April and not see my kids, Ottawa changing the rules yearly.... And in the current environment, if you happen to have money left over after all of the above, Ottawa gets pissed and takes it from you indirectly (dividend tax credit adjustments anyone?) or directly (TOSI.) Then have it insinuated by the general public that because I'm a "business owner", I must be super rich and have lots of money (Because everything is a "write-off" right? ...)

OR instead, I can go work for the Government (CRA), and make way more money, especially with that defined benefit pension and cost of living indexing factored in. And if you happen to not make enough money when compared to your private sector peers, just have your Union yell at the Feds. Small business owners are a subsegment of a subsegment of the voting base, but the Union, well, gotta keep those union voters happy, cause there's tons of them.

And I'm not giving the Govt/Public sector guys a hard time here either. You'd be stupid not to pursue that type of career/pay the bills that way when compared to running a business in Canada right now. The upside to a T4 gig is so much better than all the endless list of risks, problems, and headaches that come with running a business.

How would I fix it? I can think of two big changes off the top of my head:

-- Drop both corporate tax rates and personal tax rates, COMBINED with getting rid of all of the stupid-ass political feel-good credits that politicians use for vote-buying. (Canada Employment credit, Canada Child Benefit, etc.) Functionally you would keep the same tax base, but it would simplify things SOOOO much for everyone. More people would keep more $$$ from their paycheques, instead of wasting time dicking around with a 15% pro-rated tax credit that you see once a year in April...

-- Get rid of the Small Business corporate rate, and come up with some sort of program(s) that actually helps/incentivizes small businesses to grow and get bigger/hire employees (AKA support your own local economy.) For example, run a private business that employs at least 6/8/10/whatever full-time people? Congratulations, you get some sort of Federal guarantee/backing that will let you get a cheaper rate on your personal mortgage. (Maybe CMHC style guarantee accessible to business owners only?)

Or maybe if you employ "X" amount of people, you get access to some sort non-idiot version of the current SRED Program, where you get Government money to use to help develop better stuff for your business. (In my case, I'd love to hire a local software outfit to develop a better software that could import and calculate ACB tracking right from a client's broker statements.)

Fundamentally, I can't name many up-sides to being self-employed vs. people working a T4 job-job in Canada right now. If Canada wants to support its "Innovators" and "Business Owners" it needs to do more than just feel-good PR campaigns with no follow-through. The Feds need to step up and make it so that people WANT to attempt to start a business/build things/employ people. When the only reason I can tell people to incorporate is because of the "tax deferral advantage on Small Business Rate income vs. a proprietorship", you know you're in a messed up system.

Anyway, that's my rant for the day. I hate tax season.
choclover wrote: I think bigger picture I would like to see government put in policies that are more business friendly. Small businesses are the lifeblood of our economy. They create jobs, they contribute taxes and they create interesting communities in which to live and enjoy.

All I have seen over the last several years are policies that are killing small businesses.

A country whose primary industry is government and government-related organizations is not a healthy vision for any country. Yet, this is where Canada is heading.

Sure, go ahead and kill the small business tax rate. You could even charge small businesses more tax than larger corporations, while you're at it. It just really depends on what kind of country you want you and your kids to live in for the future.

BTW, the term "victim" is not really part of my vocabulary and I don't imagine most people in small business would consider themselves "victims" because anyone who rushes to this type of thinking is probably does not have the emotional intelligence required to effectively run a small business. Small business owners take on great risks and incur great expense with the optimism of realizing a profit but there are no guarantees like people get when they work in a government job where people typically earn much more than private industry would pay for the same person in an equivalent job. Perhaps it is this lack of respect for the people who form this sector of our economy that is causing it to be eroded in our society. However, the same people that knock these people fail to understand where the taxes that fund their salaries actually come from.
______
MR CROSSBORDER KNOW IT NOTHING, but ready to spew forth. (Also a CPA)
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Jan 15, 2017
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User452441 wrote: I read that article yesterday, and I was amazed at the stupidity of the government to allow it. I am not going to slag, anyone doing it, tax avoidance is legal. Good post above yours by CrossBorder guy. Also Well worth a read.
It seems like it's just a way for the current owner to siphon off 100% of the earnings from the next 5 years tax-free, which would likely never be possible with a non-at arm's length buyer.

After all, the new owner needs to eat, pay bills etc.

Also, why would the previous owner need to keep shares in the new corp?
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Jun 22, 2011
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It strange how threads like this, that are 5ish years old, based on nothing but wild conjecture, from which nothing really came, seem to survive so long on RFD.
Garth Turner is a conservative cuck. Stop listening to dumb af conservatives and watch your life magically improve.
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Jan 15, 2017
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MattyMattMatt wrote: It strange how threads like this, that are 5ish years old, based on nothing but wild conjecture, from which nothing really came, seem to survive so long on RFD.
Garth Turner is a conservative cuck. Stop listening to dumb af conservatives and watch your life magically improve.
Was the ending of income sprinkling conjecture?

This is just additional focus on the same mechanism - mainly people that plow income into CCPCs, paying only minimal tax on retained earnings.

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