Tax Planning in a Questionable Future Tax Environment | Page 4 | General financial discussion | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

No permission to create posts
sp_Feed Topic RSS sp_TopicIcon
Tax Planning in a Questionable Future Tax Environment
December 16, 2020
3:42 pm
Norman1
Member
Members
Forum Posts: 3789
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

Jon said

The dollar amount maybe a bit off, but my idea is sound.
Let say the house now worth 3 million and the person only take home 18000CAD a year with GIS and OAS included, my argument will make a better sense here.

Not sure if the idea is sound. One needs a good estimate of how much an asset test for GIS and OAS could save.

If it only turns out to be around $100 million a year from those few lucky Canadians that end up in $3 million houses that they bought decades ago for $250,000, then forget it.

$100 million makes for good headlines. But, ±$100 million in an annual federal budget of $300 billion is not going to make a big difference.

It could end up costing that much for HRDC to update their systems to start accepting net worth statements from OAS and GIC recipients and auditing them.

It will also be messy with assets that don't necessarily maintain their value. Did those people with Nortel shares ever have the $800,000 shown on their brokerage account statement? Not really.

It is similar with houses. With the oil price collapse this year, I suspect some of those $1 million houses in Alberta are not worth $1 million now.

If one wants to collect $100 million more from taxes, just raise them 0.033% across the board. Lot more reliable and no increase in bureaucracy.

Keep in mind a big benefactor of such intricate tax increases or program rules may not be taxpayers in general but those taxpayers who end up working for the government to implement them.

December 16, 2020
4:22 pm
Bill
Member
Members
Forum Posts: 2265
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Raising all taxes over 8% (forever, I presume) and then using that extra tax revenue to service yet another $2 trillion in new debt? That's quite the idea.

I do agree that tax measures sometimes are most beneficial to gov't workers, a good strategy for those parties the public sector usually votes for.

December 16, 2020
7:46 pm
Loonie
Member
Members
Forum Posts: 6829
Member Since:
October 21, 2013
sp_UserOnlineSmall Online

christinad said
Thanks for the reply. The issue of making tax reform equitable is an interesting one. Did someone here suggest increasing the gst? Perhaps that is the best way to spread a tax increase to everyone.  

GST is a "consumption tax", which I mentioned somewhere earlier as a possibility. The problem or limitation with it is that it taxes both discretionary (new clothes) and non-discretionary (toilet paper) purchases. Women have sometimes complained that they are hit harder with such taxes because of the costs of make-up and nylons needed for work (maybe less so now), higher cost of dry cleaning for blouses than shirts, tampons, all taxable and compounded by lower salaries, and so on. Income at the lower end doesn't usually rise enough to cover such changes along with other inflationary pressures. Sometimes this can be remedied by exempting certain products (food, tampons etc have been exempted in various places).

(Someone may have mentioned these issues above. I have not read the whole thread yet.)

savemoresaveoften said
Well in general most person / family should not be buying /selling more than twice.
Once for their starter home, and then maybe upgrade cuz family grows.
The 2nd home they own, they should be in that residence for at least 20 years before they need to sell, hence no need to worry about the tax anyway. And the tax free gain for the seniors help fund their retirement years too.
And if someone just want to flip houses every few years, yeah make them pay the tax when they make money on it.
I can see real estate agents and mortgage sales people would also seriously oppose the tax, as its in human nature to oppose changes that are going to negatively affect the individual.
We will never see such thing as a equitable tax to all. People complain about flat tax saying the rich not paid enuf, the rich complain about progressive tax saying they pay too much....  

Who are you to tell people how often they "should" sell/buy a house?
Do I really need to point out that such decisions are often, perhaps usually, motivated by real needs such as job change, need more or less space, etc?

As I may have said before, if your concern is flippers or foreign buyers, then do something about that and forget the rest of this bad idea or dictating when people should be selling.

A question for you. According to your scheme, what happens if someone has to be capital gains tax on the sale of a principal residence, buys another home instead, the second house loses value, then they sell later but don't pay tax because there has been a capital loss. Are you going to reimburse them for the first tax to offset the loss? This is not at all far-fetched because the impact of your tax could be to depress the cost of houses, which is apparently what you want to achieve.

The reason people can't buy houses as cheaply as they'd like is because there aren't enough of them. It's always a matter of supply and demand.
The big cities in Canada are going through growing pains. There aren't enough houses for everyone to have a backyard etc. in they areas they want or need to live. Look at all the major world cities and you will see that private homes (not apartments or condos) become more rare as the city grows. Would that our city planners truly appreciated this and supported appropriate building strategies!
Some of these apartment-style homes, rented or owned, in other major cities are quite luxurious. I was in one in Paris, invited for lunch, and in another in Vienna, invited for a sit-down served dinner with over 20 people at one grand table. These were large, well-appointed homes, but they were not houses. People there don't expect to own a house.

December 16, 2020
9:09 pm
Jon
Member
Members
Forum Posts: 382
Member Since:
August 9, 2014
sp_UserOfflineSmall Offline

Loonie, I suppose we can levy a different rate of sales tax on discretionary and non-discretionary purchases to partially remediate the problem you mention.

I am sure capital gain tax on principal residence can be structure in ways that future capital loss can trigger reimbursement by the tax man on past capital gain tax on principal residence.

However, I personally agree that it is not a good idea to have a very large real estate sector as it does not increase productivity in the long run, money is better spend invested in other things.

Loonie, I agree that people's mentality about owning a house have to change. This has to happen before we change the planning regulation, otherwise we're just going to have lots of people protesting at the politicians all the time (and turn all urban planning matters into a drag out political drama, where politician's time cannot be spent on things that are more beneficial to societies)

December 16, 2020
9:51 pm
Loonie
Member
Members
Forum Posts: 6829
Member Since:
October 21, 2013
sp_UserOnlineSmall Online

The people who are hollering about not being able to afford what they want (and their parents who advocate for them) are not going to protest planning changes that accommodate them. Some of these changes are creeping in in Toronto already but not necessarily widely known. The lots on my street are not wide and most have shared drives, but we are now allowed to build a rental unit over the garage, a recent change. It is strange how this has been introduced, as most people don't know about it and it was not given publicity to any extent. I found out about it accidentally. One person on my block has done this. We have aged infrastructure that doesn't really support this kind of activity. Hence the need for better planning.
In the next block, someone turned their garage into a small independent unit several years ago before this change. It seems to be legal although I don't know the details. I'm pretty sure they somehow got it severed as it was for sale at one point - very affordable but small.

I understand that Vancouver has some kind of laneway housing now permitted. Times are changing!

No doubt capital gains on primary residence COULD be adjusted to reimburse later losses, but the whole point of this discussion in the first place was to discuss ways of increasing government revenue. If house prices fall, and reimbursements due, government could regret their reliance on this measure. Even this tax depends on a thriving economy. It is not the solution to a flagging one.

December 17, 2020
5:59 am
Bill
Member
Members
Forum Posts: 2265
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Nothing wrong with flippers, as long as it's their principal residence while they own it. As Loonie says, who is anyone to tell anyone else how many homes they are allowed to live in in their lives? If people choose to move every few years or so, fine.

I like the HST vs income tax because I can avoid the former to a large degree. "Basic groceries" and housing, exempt. Women's products like tampons are exempt (I think in Scotland they just voted to make them free!), why do I pay HST on what I need to buy to remove my beard? Not fair!

December 17, 2020
6:44 am
dougjp
Member
Members
Forum Posts: 245
Member Since:
January 9, 2011
sp_UserOfflineSmall Offline

Bill said
Nothing wrong with flippers, as long as it's their principal residence while they own it. As Loonie says, who is anyone to tell anyone else how many homes they are allowed to live in in their lives? If people choose to move every few years or so, fine.

I like the HST vs income tax because I can avoid the former to a large degree. "Basic groceries" and housing, exempt. Women's products like tampons are exempt (I think in Scotland they just voted to make them free!), why do I pay HST on what I need to buy to remove my beard? Not fair!  

Agree. If anyone likes to pay land transfer tax, moving expenses, realtors fees, fixing things that were already fixed in the home they had, and buying things they need/want in a different house that they already had in the previous one, knock yourself out. Funny how when people say how much money they made (if they did) when they sell a house, they always inflate the number by never including other costs.

To me, I compare it to paying multiple tens of thousands of dollars as broker's fees just to sell one block of shares and buy another, thereby placing you well in a hole to start off, if one is realistic about costing.

I believe, for most people, changing or buying a first property is driven by other things, with the prospect of making money way down the list if at all. Examples are; Job and/or location change, change in life status (could be many things), really bad neighbors, pending major costs, emotion, desire to get some features not available where they are.

December 17, 2020
8:18 am
Bill
Member
Members
Forum Posts: 2265
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

Agreed, dougjp, flippers create economic activity. But note that at discount brokers the online trading fee is $10 or less, thus irrelevant when selling and buying stocks.

December 17, 2020
10:56 am
savemoresaveoften
Member
Members
Forum Posts: 475
Member Since:
March 30, 2017
sp_UserOnlineSmall Online

Bill said
Nothing wrong with flippers, as long as it's their principal residence while they own it. As Loonie says, who is anyone to tell anyone else how many homes they are allowed to live in in their lives? If people choose to move every few years or so, fine.

I like the HST vs income tax because I can avoid the former to a large degree. "Basic groceries" and housing, exempt. Women's products like tampons are exempt (I think in Scotland they just voted to make them free!), why do I pay HST on what I need to buy to remove my beard? Not fair!  

well no one is telling anyone how many homes they are allowed to live. Just like someone pays tax on capital gain on stocks and no limit how often they are allowed to trade, house flippers just pay capital gain on houses they flip, and they can do it as many times as they want. And if someone wants to move every 6 months, that is fine too. Just pay the tax if there is a capital gain on the so called "principal residence" that gets changed every 6 months ! And if one now argue that "who is to judge how long one needs to stay at a principal residence", let just say it has to be reasonable. Perfect example is Revenue Canada recent tax a handful of million $ TFSA account cuz the gain is beyond "reasonable" and no longer a "savings" account. I would love to see Revenue Canada to go after those that flips "principal residence" regularly.

December 17, 2020
11:57 am
Bill
Member
Members
Forum Posts: 2265
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

savemoresaveoften, first, unlike for stocks there is an exemption for principal residence in the income tax Act. And "reasonable" is no good in this case, too ill-defined, need to provide more clarity as this affects pretty much every Canadian except lifelong renters. So provide your rules. (Don't forget, on any given day we're all allowed to have a principal place of residence that day, i.e. if you say it wasn't my principal residence in your 6-month scenario, then where else was my principal residence during those days?)

TFSA issue is not about reasonableness of size of gain but about frequency of activity, i.e. frequent traders are deemed to be in investing business, not saving activity.

December 17, 2020
9:29 pm
Kidd
Member
Members
Forum Posts: 642
Member Since:
February 27, 2018
sp_UserOfflineSmall Offline

Since i see zero benefit from the taxes i pay, and the government of canada is in the business of buying everything for all the deadbeats.

Can i claim ALL the taxes i pay as a charitable donation?

December 18, 2020
1:01 pm
rodeworthy
Member
Members
Forum Posts: 67
Member Since:
February 1, 2016
sp_UserOfflineSmall Offline

Has anyone else experienced CRA NOT collecting their December 15 installment payment? These payments have been automatically extracted from our bank account in the past with no input from us. Not so, for the Dec. 15/20 payments. Can't find any information about delayed payments for this time period, can't get anything but superficial info when logging into MyAccount, and there is an exceptionally long wait time for telephone contact. Not helpful.

December 18, 2020
1:18 pm
Kidd
Member
Members
Forum Posts: 642
Member Since:
February 27, 2018
sp_UserOfflineSmall Offline

rodeworthy said
Has anyone else experienced CRA NOT collecting their December 15 installment payment? These payments have been automatically extracted from our bank account in the past with no input from us. Not so, for the Dec. 15/20 payments. Can't find any information about delayed payments for this time period, can't get anything but superficial info when logging into MyAccount, and there is an exceptionally long wait time for telephone contact. Not helpful.  

Rodeworthy. I have always paid mine manually, meaning i pay them. I am NOT paying December's installment because my income for 2020 has been substantially reduced.

December 18, 2020
1:36 pm
pooreva
Member
Members
Forum Posts: 206
Member Since:
April 2, 2018
sp_UserOfflineSmall Offline

rodeworthy said
and there is an exceptionally long wait time for telephone contact. Not helpful.  

Why everybody complains about 'long wait times'??? Don't you have 'speaker' button on whatever phone you are using? I have no issue waiting for hours while doing something more useful. AND when you get an agent, (s)he always resolves my issue(s). So it is worth to wait.
I paid Dec. manually; in a 2-3 months I will get it back (hopefully); it is better to pay installment then later some fine, interest, whatever...

December 19, 2020
1:47 pm
rodeworthy
Member
Members
Forum Posts: 67
Member Since:
February 1, 2016
sp_UserOfflineSmall Offline

Kidd said

Rodeworthy. I have always paid mine manually, meaning i pay them. I am NOT paying December's installment because my income for 2020 has been substantially reduced.  

Kidd, I have decided to go ahead and pay the installments manually. I checked our bank account history of payments to the installment accounts and there are none. Not so for filing accounts, but that is to be expected. With my luck with CRA they will probably go ahead with the automatic deduction after the fact. They have never been late before but these times, they are a changin'.

No permission to create posts

Please write your comments in the forum.