If you’re in the market for a new car or home, you may want to consider getting a tax advisor to help you prepare your return.
That’s because, according to a new report, a growing number of Canadians are paying more and more into their governments tax coffers through the tax haven of “uncompensated sales” — where they’re not required to pay any taxes on their purchases.
According to the report from the Canadian Taxpayers Federation, between 2001 and 2014, the number of Canadian taxpayers who reported that they “paid for goods and services” or “used personal resources to pay for goods or services” in excess of $100,000 increased from 8.6 per cent to 14.4 per cent.
That means that between 2001 to 2014, Canadians who reported they paid for goods in excess a certain amount of money, were receiving a tax benefit on that amount.
The CTF report found that the majority of these transactions occurred in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba and New Brunswick.
This is despite the fact that these provinces have the lowest effective tax rates in Canada, according the CTF, with a combined provincial average effective tax rate of just 2.6 percent.
The study also found that more than a third of these sales were “sales” of property, with the average value of these purchases in Ontario at $2.2 million.
This is a huge jump from just three years ago when only one in five of these “sale” transactions were in the form of “sourcing,” which means that a person would be expected to pay taxes on those purchases.
“Sourcing” includes the sale of goods and other personal services to a company, such as building materials or building supplies, and can include the purchase of goods or other personal resources, such an apartment, vehicle, computer or other home goods.
While this means that the vast majority of Canadians will likely pay no taxes on these sales, the CTP found that those who did pay taxes actually had a higher effective tax burden.
The report notes that “sources of income, such, a job, education or income from a trade or profession, are often not subject to the full value of the transaction.”
While it’s possible that the CTC study is underestimating the true extent of tax avoidance, it does paint a pretty bleak picture of the current situation for the majority who would be paying their fair share of taxes.
“For a large number of tax filers, these payments are not being reported in accordance with the Taxation Act and the Government of Canada does not require them to do so,” the CTT report states.
“A large proportion of these taxpayers, who will likely receive the bulk of their taxable income from sources that do not meet the threshold for the deduction of qualified capital gains, will be able to claim a refund of their tax, even if they are unaware of the payment.
As a result, many taxpayers will not have any tax savings from their sales.”
The CTP report points out that “a significant proportion of the taxpayers will likely be unable to deduct the value of their purchases.”
That means that for some of the tax filer groups, the amount of taxable income that could be claimed could be as high as $4,000.
For example, a single person earning $80,000 could potentially be able get back $4.5 million.
According the report, “the majority of individuals will not be able claim any tax relief from the increased value of personal resources or goods sold through uncompensating sales.
And for those individuals who claim tax relief, it is unlikely that they will have any cash left over to make up for the cost of these goods and/or services.”
As such, the majority, and most Canadians, will likely not see a reduction in their tax burden when they report their tax returns in 2020.
