It sounds like we’re going to have to know and be able to apply two sets of principles, as private companies and non-profits won’t be required to switch that early, if at all.
A proposal being looked at right now is having a Framework for Owner-Managed Enterprises, which is based on a pared-down version of current Canadian GAAP. Either know both or limit your possible clients.
At least we won’t have to learn two sets from scratch, but hopefully down the line there’s a more elegant solution to the problem.
Commissioner and chief executive of the Canadian Revenue Agency reminds us in a story in the Financial Post that there are no random audits in Canada.
If your tax return is selected for audit, the CRA has identified some aspect of your return, be it a deduction claimed or an industry that it is focusing on, for additional scrutiny.
This should be reassuring to the majority of filers, since most people earning a wage have limited deductions available to them, compared to corporations. But should there be some percentage of tax audits selected at random from the entire population?
The Canadian government released a mini-budget this past week that featured serious tax cuts. The GST goes down another point to 5% and the lowest bracket of personal tax is lowered back down to 15%. Corporate taxes continued their downward trajectory.
The CICA focused first on the reduction to corporate taxes:
“The government’s commitment to reduce the general corporate tax to a rate of 15% by 2012 is a positive step toward making Canadian companies more competitive,” said Kevin Dancey, FCA, President and CEO of the CICA.
Their media release about the announcement actually doesn’t even mention the GST or personal tax. That’s a little strange. I hope they’re just working on something really special and it’s taking longer than expected, because they would be remiss to miss out on commenting on these topics as well.
Clearly we as a profession should have something official to say about personal and consumption taxes. I know I do, as an individual member.
The Basic Personal tax credit amount was raised to $9,600 in 2007 and is scheduled to rise further to $10,100 in 2009. This is a positive step and smart policy, as a strong argument can be made to increase the limit to the poverty line. Any increase here is progressive and ought to be well received.
The cut to the GST from 6 to 5% as of January 1, 2008 is essentially regressive and rewards increased consumption. Shifting the savings here to the Basic Personal credit or lowering the general rate on income tax would have been better and greener.
Canada is riding high on a wave of prosperity, the loonie has reached levels not seen since before the 20th century, and unemployment is reaching all-time lows. It is only fitting that the Federal government return some of its surplus to Canadians.
The last time I cracked open the Act, it was probably tax class in university. Once you’re done those classes, there’s really no need to delve into the swirling mass of dense legalese again. There are many more comprehensible sources for tax information, so don’t read the Income Tax Act. In its place, do these things:
Read accounting firm websites. All the major firms have sections on their websites that offer regular tax facts and updates, detailing bits of tax law applicable to your situation, whatever it may be. Again, plain English (for the most part, although we do tend to introduce jargon from time to time).
Read tax textbooks. I still do this when I want a refresher. Textbooks are occasionally dense, but usually still much easier to read and understand than the Act.
Call in to tax related TV call-in shows. These seem to be on regularly, on CityTV especially and other fringe channels that predominantly have call-in shows. They feature knowledgeable experts sharing advice for free.
Use tax software. If you own one of the tax packages people use to do their own taxes, these can be used to answer your questions in a meaningful way: with your numbers, or with dummy data as examples.
Reading the Act is best left to the professionals who have specialized in tax. As you can see, there are many alternatives, most of which are available on the web, that the average person can use instead to find guidance on any particular issue.