Fiddling with the Act – Changes to Taxes
Plus ça change, plus c’est la même chose… Successive governments have made changes to the Income Tax to further ideological policy objectives. Harper’s Conservatives introduced several measures to give seniors a break – most notable being Pension Income Splitting. While this is very helpful to seniors it makes it impossible for them to file their own tax returns and get the proper amount to which they are entitled. As a side note, Trudeau was contemplating abolishing this measure until someone pointed out to him that seniors actually vote!
Universal Child Care Benefit (UCCB)
Conservatives also increased the UCCB and Trudeau campaigned hard on the fact that wealthy people got this benefit as well (including his family) but unaware that it was a taxable benefit so it got taxed away. It has been replaced by a much more lavish, non-taxable child benefit which is income-tested so only lower-income families fully benefit. Great in theory but a most powerful incentive for common-law couples to practice tax evasion (for which one can face prison) by claiming they are divorced or separated.
What Else Changed – The Caregiver Credit
The Caregiver credit has been completely altered. The Federal 2017 Budget has eliminated the 3 existing caregiver credits, including the Caregiver Amount, Infirm Dependant Amount, and Family Caregiver Amount, with the new Canada Caregiver Credit, effective for 2017 and later years. The elimination of this credit federally also eliminates it for BC, Ontario, Saskatchewan, and Yukon, because their legislation for this depends on the federal credit. The other provinces and territories have legislation for this credit that does not depend on the federal credit. BC, Ontario, Saskatchewan, and Yukon would have to revise their legislation to retain this tax credit. If you or anyone else are able to claim the line 305 eligible dependant/equivalent to spouse credit for a person, then line 315 caregiver amount may not be claimed for that person. However, if the line 315 amount would have been greater than the line 305 amount, the difference can be claimed as a line 305 additional amount. If you understand this – congratulations! Book expense (a calculation based on months of study from T2202A) has been eliminated, reducing the credit from tuition expenses. Federal child fitness and arts amounts have been discontinued. The most notable change was the elimination of The Family Tax Cut. This Conservative measure was deemed to be too controversial for Harper’s own Finance Minister who quit over Harper’s insistence that the tax cut be introduced. "This is a plan, as (former finance minister) Jim Flaherty said, that will increase inequality in our society…"(CBC). It is true that for the full $2,000 cut in tax to operate there had to be a couple (married or Common Law) with:
- One party with a large salary/wage, and
- One party with a much lower wage/salary plus children under 18.
Therefor those with high family incomes benefited more than those with less. BUT it did force couples to file as couples, whether they were married or common law.The biggest single inequity we see - and we see it a lot - is couples who lie and cheat on their tax returns – stating they are single when they are in fact common law. The Trudeau measure pays the highest rewards to those who lie and cheat – thus encouraging the continuance of this behaviour through rewarding it.
Has Anything Really Changed?
The upshot is that there have been many changes but not much has changed. Each change adds complexity to the process of filing a tax return. This makes it more useful than ever to have your taxes prepared by a professional.If you think it is expensive to hire a professional, wait until you hire an amateur! You can follow and like us on Facebook as Mount Albert Tax Company or Holland Landing Tax Company, and you can connect with us on LinkedIn. Until next time, Ian