Is Canada Run by Children?

The commotion in the Canadian SME community over the Liberal government’s proposed tax changes affecting family held corporations is easily understandable, and the mythology used by our Prime Minister to justify these ill-conceived proposals raises the question of whether our country is being run by children. 

The PM this past week hoisted the strawman argument that it is not fair that someone earning 50k should pay more tax than someone earning 250k. I’d like him to produce an example of where that occurs.  Sure, if someone has large losses in other businesses that offset his 250k business income, I can see that his tax bill might be less than that first guy’s, but that’s because the second guy really doesn’t have a total income of 250k.

The PM insists that he is set on equalizing tax treatment of the wage earners with tax treatment of the self-employed. IF he was sincere in that AND if he understood what he was talking about, he would tackle the BIGGEST inequality which is that the wage earner only gets taxed on the income he actually receives, while the self-employed guy pays taxes on what he hasn’t received. If that entrepreneur invoices a customer in a given year and if that invoice remains unpaid at the end of the year, the entrepreneur is taxed on it as though it were income received.  Further, he has to pay CRA the GST that he charged his customer even though his customer has not paid it to him. A whopping double tax hit for something he has not received.

You might think that the self-employed guy should just not invoice that non-paying customer and save himself the income tax and GST. The problem is he doesn’t know if his customer will pay him, and if he doesn’t invoice the customer, he is not allowed to deduct the costs he incurred to do the work or acquire the goods for which he is invoicing. So that means having paid money out of his pocket for business purposes but which does not reduce his income for tax purposes. He’s caught either way.

If the PM were to tax the self-employed on the basis of cash received, just like wage earners are taxed, then one might actually believe him when he says he is eliminating inequality, but right now he has no credibility in my opinion. I don’t think he’s being malicious,

but I do think he doesn’t know what he’s doing. 

I am not going to take the time to further address the proposed changes; maybe later though. In the meantime, one can hope that the mist clears for Mr. Trudeau and that he is able to see the landscape with fresh eyes.