I am done with our administration. I am done with the non sense involving taxation.
Let's start off with the first one, the UHT or Underused housing tax. What was the policy goal? Tax non resident owners of Canadian real estate who leave the properties vacant. Great in theory. In practice, under the UHT act any corporation or trustee of a trust who owns real estate, had to file a UHT return for 2022 even if no tax was owed. The penalties for non-compliance were $5,000 per property if an individual, or $10,000 per property if owned by a corp. Considering how many private citizens might rent out an apartment or condo under a corporation that resulted in a lot of filings for $0 in tax owing. The more egregious story I heard was of one bare trust with 3 trustees that had over 150 buildings. This meant they had to file over 450 returns for $0 in tax owing.
https://www.advisor....ng-tax-to-date/
And apparently less than 2% of returns filed actually had any tax owing, and the tax collected thus far is substantially lower than estimated so I have no idea how the CRA plans to enforce any of this.
Then there came the bare trust fiasco. Near the tail end of last year the CRA out of nowhere announces a brand new filing obligation for all bare trusts. This filing is due March 31 (as if we don't already have enough work to do by this deadline). The question becomes, what is a bare trust? That's a great question because after spending hours and hours researching I still can't give a definitive answer.
per CRA
The term "bare trust" is not defined in the Income Tax Act. However, a bare trust for income tax purposes is a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property.
A trustee can reasonably be considered to act as agent for a beneficiary when the trustee has no significant powers or responsibilities, the trustee can take no action without instructions from that beneficiary and the trustee’s only function is to hold legal title to the property. In order for the trustee to be considered as the agent for all the beneficiaries of a trust, it would generally be necessary for the trust to consult and take instructions from each and every beneficiary with respect to all dealings with all of the trust property.
A common example of a situation where a bare trust arrangement can exist is when, for privacy reasons, a property developer establishes a bare trust arrangement that will hold registered title to real property, while the developer retains beneficial ownership.
Real clear right? So when calling the CRA and asking them basic questions like... hey my client opened and managed a savings account for their 6 year old child that earns a small amount of interest. DO I need to file a t3 for this? The answer is... probably? What about a scenario in which a parent purchases a phone for their child? There's an argument to be made that might be a bare trust. Therefore there might be a filing obligation for every single canadian parent that either opens an account on behalf of their child or pays for their cellphone. The penalty for non filing? greater of $2,500 or 5% of the max FMV of the asset.
Needless to say this caused a lot of confusion, and half way through march, the CRA said they will waive penalties for all except the most egregious of scenarios, and then 3-4 days before the deadline, they said there will no longer be a filing obligation for 2023.
This means... for anyone who paid someone to do a return and the return was filed, you paid someone to do something that didnt need to be done (one firm i know of charged $750 per return). OR, what happened in many cases is the work was completed and never billed. This means accounting firms across the nation had to eat the cost of lost billings in, THE MIDDLE OF BUSY SEASON!!!. AS IF WE DONT ALREADY HAVE ENOUGH ON OUR PLATE!!!
And now this dumb capital gains increase is announced, with a 10 week notice period, and the draft legislation only became published last week. This means even more work with clients requesting consultations on this.... Even better! Now I will disclose if a government needs to raise taxes to enact policies I am not opposed to that. What I am opposed to that is retroactive taxation. A very big sticking point I have (that's almost never mentioned in most media outlets), is the current legislation as is is going to result in retroactive taxation.
example: I buy a property at $1 10 years ago, and it is now worth 11$. This means on average, my gain per year is $1. If I sell the asset before the june cut off, my gain of 1$ per year is included in income at a rate of 50%. If I sell it after, my gains are included in income at a rate of 66%, even though on average, 90% of the gain was realized in a previous period.
It's a retroactive tax and this goes against one of the fundamental principals of the Income Tax Act, the idea of Tax Fairness. The idea that you may hate to pay tax, but at least the system is fair and the government cannot change the rules on you after the fact (CRA does this unfortunately however taking the CRA to court over $200 in tax payable isn't worth most people's time). If the government wishes to change tax rates, it can do so, but only PROPSECTIVELY. It can't just say, hey we have a cash shortfall, we should increase what the 2020 tax rate was retroactively and collect a ton in interest and penalties. It's the tax equivalent of the government passing a law banning the drinking of alcohol today, and charging you for this offense when you committed it when it was still legal.
And the Liberals have the GALL to say this new tax is about fairness...
I am done. As much as I hate PP and ABHOR everything he stands for I'd rather him in power at this rate cause I doubt he's going to be making as many boneheaded decisions about taxation.
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Abyss, on 26 September 2023 - 05:11 PM, said:
