Taxes in Canada are Incredibly High
The percentage of tax that Canadians pay is completely outrageous. While some taxes appear to be reduced, others are increased and new ones added, to continually increase revenues for our politicians to squander.
It’s the Government’s version of the shell game!
The average Canadian now pays half of their income in some form of taxes, while the highest income earners pay as much as 75% of their income in some form of taxes.
That is why serious tax planning is more necessary than ever.
Not just for the few of the top income earners but for every Canadian.
You owe it to yourself and to your family to keep more of what you earn.
That is why you need the help from a financial planner who can implement strategies to get CRA hands out of your pockets.
The Taxation impact on your financial future.
85% of all Canadians retire broke, dependent on friends, family, or the Federal Government for their primary source of income. According to the Bank of Canada and Statistics Canada in 2009, the majority of Canadians spent $1.60 for every $1.00 earned.
How much tax do we pay?
First $11,809 is tax exempt.
From $11,809 to $42,960 = 20.5%
From $42,961 to $46,605 = 24.15%
From $46,606 to $75,656 = 29.65%
From $75,657 to $85,923 = 31.48%
From $85,924 to $89,130 = 33.89%
From $89,131 to $93,208 = 37.91%
From $93,209 to $144,489 = 43.41%
From $144,490 to $150,000 = 46.41%
From $150,001 to $205,842 = 47.97%
From $205,843 to $220,000 = 51.9%
From $220,000 PLUS = 53.55%
In 2008, the highest tax bracket was 46.41%. Over the past 10 years, our personal income tax increased by 7.14% and when you combine this with the average rate of inflation over the last 10 years of 1.73% per year, it adds up to 17.3%.
The purchasing power of the dollar has dropped by a whopping 24.44%
We have employment tax:
Canada Pension Tax
Employment Insurance Tax
The Consumers Tax
We then have Asset Taxes:
Property taxes 2% of assets every year.
Commercial Property tax, 4 – 6% of assets each year.
50% of all property taxes go to education and infrastructure.
Therefore, where does our income tax go?
Capital gains tax, something we never had up until 1972, which is payable at approximately 25%, subject to your tax bracket.
We have permits that are a form of tax as the money goes to the same place.
Business permits which can be anywhere from $10 to $500 per year.
Building permits and renovation permits are from $500 to $5,000.
A home business permit is $50
Fishing and hunting permits.
Special events permit for weddings and parties, etc.
Did I mention Drivers licences and vehicle stickers?
We have Professional licensing for all professions and trades people.
Canada is one of the most taxed countries in the world, paying over 800 direct and indirect taxes.
How about Government Waste?
In 1995, Gun control registry was supposed to have a cost of $85 million over 5 years, but ended up being over $1 billion, and then it was scrapped.
G20 Convention was supposed to cost $100 million but in fact, cost $1.5 billion.
Then there was, The Sky Dome.
Pearson Airport, etc.
The Canadian Senate is neither elected nor accountable to Canadians. For nearly 20 years now, politicians have dragged their feet on senate reform, costing Taxpayers billions of dollars.
Canadians are seriously concerned about their Governments handling of public money and have lost faith in their politicians.
The Fraser Institute, Canada’s leading, financial think tank, reported by the end of 1999, Canada’s gross debt was equal to $3.5 trillion, which at the time was equal to 410% of Canada’s Gross Domestic Product (GDP – all the goods and services produced in Canada, in one year).
The Federal Government has run deficits in 37 of the last 50 years, which has resulted in a Federal debt of over $162 billion. This debt cost Canadian Tax payers $26 billion a year in interest payments.
I remember alerting my clients in the 1990’s that we were becoming too dependent on foreign investment into buying our bonds because our debt level was too high at $700,000,000.
Another alarming issue is that tax payers cannot afford to pay billions of dollars each year to bail out Government employee pension plans.
Especially, when Canadians start to use their RRSP funds, which are, 100% taxable when they start to use them.
Let’s do a Reality Check
A 40 year old Canadian Tax payer in Ontario earning $100,000 per year will pay CRA $24,550.94 in income taxes.
He will also pay them $2,500 for CPP benefits that he may not collect because of claw backs if he buys RRSP’s [See article on Tax time Bomb].
He also has further deductions of $2,200 for E.I insurance.
That’s $29,250.94 from his paycheque.
Mortgage and property taxes were on average $24,000 which has now gone up sharply since 2009 housing boom started, especially in the greater Toronto area.
Electric, gas and water bills add up to a further $7,600 again these prices have gone up since 2009.
Ontario pays some of the highest Hydro rates in North America despite having three nuclear plants with multi generators and an influx of windmills added to the grid.
Therefore household costs are $ 31,600
Car payments, maintenance and gas add up to another $12,500. Groceries, restaurants and entertainment add up to another $12,500.
Clothes are another $6,000 per year.
Personal Dental etc. depending on the size of a family, can add up to another $7,000.
So the total necessary, just to live is $98, 850.94, per year.
Now add HST OF $6.500
Hidden crown taxes of $5,000 and the total Crown Taxes is a further $11,500
[When you add the payroll taxes and property taxes, the total Crown/CRA taxes are $48,750.94 or 48.75%].
Bank interest [including mortgage] and credit card interest can add another $26,000. Insurance for credit cards, automobiles, house and Life insurance can add another $6,000.
So the 3 big bad wolves take up to 80% of your income, this leaves 20% remaining which is not enough to live on.
This is why we are forced to borrow and live in debt.
The same 40 year old making a $100,000 a year during his life time has paid $1.6 million in direct taxes and a further $600,000 in indirect taxes
He will pay a further $800,000 in interest payments to his Bank, which does not include their fees.
$1.6 million at 6% return over 40 years would leave a retirement nest egg of $6,973,336.
Let me show you how you can get some of the above money back.
Proper Tax planning will increase your nest egg by 2/3, 90% of financial Planners miss this completely
And it’s the best option for everyone for wealth creation. If you’re not reducing your taxes you’re not creating wealth for yourself but you are for the CRA
Benjamin Franklin said “An investment in knowledge pays the greatest interest”.
Now you have the knowledge, contact me and start taking back control of your money.