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Ontario 2013 Budget – Ontario Trillium Benefit and Employer Health Tax

May 16, 2013 By Nigel Monahan Leave a Comment

All proposals are subject to legislative approval.

Ontario Trillium Benefit (OTB)

The Ontario 2013 Budget proposes to modify the OTB so that, beginning with 2014 benefits, each recipient can choose to receive the benefit either monthly or in a single payment at the end of the benefit year.

Tax filers would choose which option they want when they file their 2013 income tax return in 2014. However, those receiving an annual benefit of $360 or less will be paid in a single payment in July 2014 – they cannot opt for monthly payments. Others opting for a single payment would receive the single payment for 2014 benefits in June 2015. Those opting for monthly payments would receive the payments from July 2014 through to June 2015.

Employer Health Tax (EHT)

The budget proposes to eliminate the EHT exemption of $400,000 for private-sector employers, including groups of associated employers, with annual Ontario payrolls over $5 million. For small employers, including small businesses, charities and not-for-profit organizations, the exemption would be increased from $400,000 to $450,000. These changes would take effect January 1, 2014. The exemption would be adjusted for inflation every 5 years using the Ontario Consumer Price Index. At projected inflation rates the exemption would increase to $500,000 in 2019.

Focused on Jobs, Growth and Long-Term Prosperity

May 10, 2013 By Nigel Monahan Leave a Comment

Jim Flaherty, Minister of Finance, on April 29, 2013 introduced the Economic Action Plan 2013 Act, No. 1. The Act proposes to legislate key elements of Economic

Action Plan 2013, including tax relief for investments in new manufacturing machinery and equipment, and indexing the Gas Tax Fund to offer stable, predictable funding for municipal infrastructure.

“While Canada has fared better than most in the aftermath of the worst recession in a generation, the global economy remains very challenging,” said Minister Flaherty. “Through the Economic Action Plan 2013 Act, No. 1 the Harper Government remains squarely focused on what’s important to Canadians, creating jobs and economic growth—while keeping taxes low and balancing the budget by 2015.”

Measures in the Economic Action Plan 2013 Act, No. 1 advance economic progress and prosperity by:

Building a stronger economy and promoting job growth:

Extending for two years the temporary accelerated capital cost allowance for new investments in machinery and equipment by Canadian manufacturers.
Indexing Gas Tax Fund payments to better support job-creating infrastructure in municipalities across Canada.
Reforming the Temporary Foreign Worker Program to ensure that Canadians are given the first crack at available jobs.
Extending for one year the Mineral Exploration Tax Credit for flow-through share investors.
Modernizing the Investment Canada Act as announced in December 2012 to clarify the treatment of proposed investments in Canada by foreign state-owned enterprises and the timeline for national security reviews.
Providing $165 million in multi-year support for genomics research through Genome Canada.
Providing $18 million to the Canadian Youth Business Foundation to help young entrepreneurs grow their firms.
Providing $5 million in 2013–14 to Inspire for post-secondary scholarships and bursaries for First Nations and Inuit students.

Supporting Canadian families and communities:

Promoting adoption by enhancing the Adoption Expense Tax Credit to better recognize the costs of adopting a child.
Introducing a new, temporary First-Time Donor’s Super Credit for first-time claimants of the Charitable Donations Tax Credit to encourage all young Canadians to donate to charity.
Expanding tax relief for home care services to better meet the health care needs of Canadians.
Removing tariffs on imports of baby clothing and certain sports and athletic equipment.
Providing $56 million in total transfer protection payments to Manitoba and New Brunswick.
Providing $30 million in 2013–14 to support the construction of new housing in Nunavut.
Investing $20 million in the Nature Conservancy of Canada to continue to conserve ecologically sensitive land.
Providing $3 million to the Pallium Foundation of Canada to support training in palliative care for front-line health care providers.
Committing $3 million to the Canadian National Institute for the Blind to expand library services for the blind and partially sighted.
Supporting veterans and their families by no longer deducting veterans’ disability benefits when calculating other select benefits.
Streamlining the process for approving tax relief for Canadian Armed Forces members and police officers.

Respecting Canadian taxpayers’ dollars:

Improving the fairness of the tax system.
Eliminating duplication.
Taking steps to align employee compensation offered by Crown corporations with what is available to federal employees.

“Canada’s Economic Action Plan 2013 advances a solid vision that has a proven track record,” said Minister Flaherty. “This is an intentional, consistent plan for jobs, growth and long-term prosperity that we have implemented with firm commitment.”

Tax Debt in Canada

May 10, 2013 By Nigel Monahan Leave a Comment

The spring 2013 Auditor General’s (AG) report provides the results of a follow-up review to determine the Canada Revenue Agency’s (CRA) progress against action plan commitments made in response to a 2006 audit of its tax collection program. Overall, the AG concluded that the CRA has made satisfactory progress against its commitments, and makes four additional recommendations to further strengthen the administration of the program. The CRA accepts all recommendations and has already taken action to respond to them.

The following provides information on the tax debt in Canada, and what the CRA is doing to address it.

What is the tax debt?

If an individual or business fails to pay their taxes on time, those amounts become a tax debt owed to the Government. The CRA works to collect all debts through the collections process. The outstanding tax debt is an inventory of amounts owed that are known and actively managed by the CRA. New amounts are continually added, while others are collected or addressed through other measures.

Why is the tax debt increasing?

A number of factors influence the amount of the tax debt at any given time. In recent years, the reasons for the increase in tax debt include:

An increase in overall revenue due to higher population and more businesses as well as the harmonization of federal and provincial taxes;
More effective targeting of measures to combat aggressive tax planning and transfer pricing, leading to additional amounts to be collected; and
Interest charges on outstanding debts which are themselves added to the debt.

How does the CRA collect the tax debt?

The majority of Canadian taxpayers pay amounts owing on time. Over the last five years, over 90% of individuals and corporations paid their taxes on time and without any intervention.

Taxes owing that are not paid are resolved through different means, depending on complexity, the taxpayer’s previous compliance history, and ability to pay. Low complexity accounts are resolved through reminder phone calls or letters to taxpayers.

How successful is the CRA at collecting tax debt?

The CRA has focused on continuously improving its tax collection program through the introduction of better strategies to prevent the debt from occurring, or resolving it before legal action is required. That has resulted in increased productivity through earlier intervention at a lower cost. As a result, the amount recovered has grown by 87% between 2005-2006 and 2011-2012. In the 2011-12 fiscal year alone, the CRA recovered $40 billion in tax debts.

An international tax benchmarking study in 2011 highlighted Canada’s strength in collecting tax debt and ranked Canada in the top 2 among 10 countries reviewed in the study, for:

The lowest cost of collecting a dollar of debt; and
Collecting the most debt as a percentage of total tax revenues.

Canada also has one of the lowest levels of new debt per taxpayer – an indication that the CRA’s approach is effective at ensuring that a higher proportion of taxes owed is paid in full and on time.

How is the CRA managing the tax debt?

The total amount of the tax debt, currently $29 billion, represents numerous types of debt, and most amounts owing are secured or under active collection. The CRA is working to recover all debts, either through automated strategies led by the Debt Management Call Centre, payment arrangements, or active collections by the CRA’s Tax Service Offices.

Canada Pension Plan (CPP) Changes January 2011 to 2016

May 2, 2013 By Nigel Monahan Leave a Comment

The following changes will be phased in gradually between 2011 and 2016. The first major change occurred in January 2011 for people retiring after age 65:

Your monthly CPP retirement pension amount will increase by a larger percentage if you take it after age 65 (gradually from 2011 to 2013).

Your monthly CPP retirement pension amount will decrease by a larger percentage if you take it before age 65 (gradually from 2012 to 2016).

The number of years of low or zero earnings that are automatically dropped from the CPP retirement pension calculation will increase (2012 and 2014).

Now if you are under age 65 and you work while receiving your CPP retirement pension, you and your employer must make CPP contributions (or if you work outside of Quebec while receiving a QPP retirement). These contributions will increase your CPP retirement benefits starting the following year.

After January 1st, 2012, If you are age 65 to 70 and you work while receiving your CPP retirement pension, you can choose to make CPP contributions (or if you work outside of Quebec while receiving a QPP retirement pension), these contributions will increase your CPP retirement benefits beginning in the following year.

These changes were designed to improve retirement flexibility for working individuals in Canada, enhance pension coverage, and improve equity in the CPP.

Shares in foreign Corporations

April 23, 2013 By Nigel Monahan Leave a Comment

Canadian residents who invest in shares which are traded on U.S. stock exchanges are not required to file a U.S. income tax return because of these investments, unless there is some other reason (e.g., U.S. citizen) for filing a U.S. income tax return. All income and capital gains from the foreign shares will be reported on your Canadian income tax return. There will be withholding tax deducted from the foreign dividends at the time they are paid, which you can at least partially recover by claiming a foreign non-business tax credit when you file your tax return. If the shares are in a registered account such as an RRSP or RRIF, there is often no withholding tax. When the foreign shares are in a TFSA, withholding tax will be deducted, and cannot be recovered. US estate tax may be payable by Canadian residents on US assets owned at the time of death, including shares in US corporations.

The dividend income received from foreign corporations does not qualify for a dividend tax credit, so tax is paid on 100% of the dividend (before deduction of withholding tax), when you file your Canadian tax return.

Distributions made by foreign shares to Canadian shareholders are usually considered foreign dividends, 100% taxable. When distributions from US shares are categorized as capital gains or return of capital for US taxpayers, they will still be considered fully taxable to Canadian taxpayers. This would also apply to foreign mutual funds or exchange traded funds.

The dividend income must be converted to Canadian dollars to determine the amount to include in your income. You can convert using the exchange rates on the dates your foreign dividend income is received, or you can use the average annual exchange rate, as published by the Bank of Canada, for all the dividends received in the year.

The adjusted cost base of the foreign shares must be calculated in Canadian dollars. If foreign funds were used to purchase the shares, the exchange rate on the date of the purchase (trading date, not settlement date) is used to convert to Canadian dollars.

When shares in the foreign corporation are sold, the proceeds are converted to Canadian dollars using the exchange rate on the date of the sale (trading date).

See the 2 examples below using shares purchased in US$:

	Transaction Amounts in US$			Exchange Rates		Transaction Amounts in Cdn$
	Proceeds (A)	Cost (B)	Gain (C)= (A-B)	Sale Date (D)	Purch. Date (E)	Proceeds (F)= (A x D)	Cost (G)= (B x E)	Capital Gain/(loss) (H)=(F-G)
1	$11,000	$10,000	$1,000	1.35	1.25	$14,850	$12,500	$2,350
2	$11,000	$10,000	$1,000	1.15	1.35	$12,650	$13,500	($850)

Filing deadline is April 30th

April 23, 2013 By Nigel Monahan Leave a Comment

Ottawa, Ontario, April 19, 2013… The Canada Revenue Agency (CRA) would like to remind Canadians that they have until midnight on April 30, 2013, to file their 2012 income tax and benefit return and to pay any balance owing.

If you, your spouse, or common-law partner is self-employed, your deadline to file your 2012 return has been extended until midnight on June 17, 2013, as June 15 falls on a Saturday. However, you still have to pay any balance owing by April 30, 2013.

The CRA encourages you to join the growing number of Canadians who are filing electronically. By filing online and using direct deposit, you could have your refund in as little as eight business days.

Online filing has become even more accessible for tax filers to meet their obligations, with more free software options available than ever before

So far this year, the CRA has already received 9.7 million online tax returns, which is more than 79% of all returns received. This represents an increase of 11% over last year at the same time in the filing season.

For more information on filing your tax return, including step-by-step help with filing your return online, go to www.cra.gc.ca/getready.

New Initiatives to Crack Down on International Tax Evasion

April 16, 2013 By Nigel Monahan Leave a Comment

Ottawa, Ontario, April 9, 2013… The Honourable Gail Shea, Minister of National Revenue, today highlighted important new initiatives introduced by the Harper Government in Economic Action Plan 2013 to strengthen the capacity of the Canada Revenue Agency (CRA) to crack down on international tax avoidance and evasion.

“Our Government has long recognized that international tax evasion is a serious problem,” said Minister Shea. “As announced in Economic Action Plan 2013, our Government is taking strong action to tackle tax evasion. We are committed to cracking down on individuals who avoid paying their fair share of taxes.”

Economic Action Plan 2013 proposes the following measures to combat International Tax Evasion and close tax loopholes to ensure tax fairness for all Canadians:

Launching a new Stop International Tax Evasion Program that will allow the CRA to pay individuals with knowledge of major international tax non-compliance a percentage of tax collected as a result of the information provided;
Requiring financial institutions and others who currently report information on international electronic funds transfers greater than $10,000 to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to also report those transactions to the CRA;
Streamlining the process for obtaining information on third parties in the course of conducting an audit to speed up the process and allow the CRA faster access to information on unnamed individuals for the purposes of civil actions; and
Introducing new requirements for Canadian taxpayers with foreign income or properties to report more information, and extending the amount of time the CRA has to reassess those who have not properly reported this income.

The Minister of Revenue has also publicly called upon the International Consortium of Investigative Journalists to provide the CRA with the information they currently hold on individuals with income or property held offshore, including 450 Canadians. This request was supported by a written request from the CRA to the International Consortium of Investigative Journalists as well as to the Canadian Broadcasting Corporation (CBC), which underscored the public interest in confidential disclosure of the information to the Agency. In addition, the Agency is working with the United States and its international partners in exploring other avenues of addressing international tax evasion.

“These new measures will provide the CRA with additional tools to combat tax cheats,” said Minister Shea. “Our Government is serious about cracking down on those who attempt to cheat the system. Since 2006, our Government has introduced over 75 measures to improve the integrity of the tax system for the benefit of all Canadians.”

No income? File anyway

April 16, 2013 By Nigel Monahan Leave a Comment

Did you know?

Even if you have no income to report for 2012, you should still file your income tax and benefit return by April 30, 2013 to be eligible for some tax credits and benefits.

Important facts

Eligibility for certain benefit payments such as the goods and services tax/harmonized sales tax (GST/HST) credit and the Canada child tax benefit is based on information in your yearly tax return.
If you don’t file, you could miss out on benefits and credits you’re entitled to. If you don’t file on time, your benefit payments may be interrupted.
You have until midnight on April 30, 2013 to file your 2012 income tax and benefit return.
Keep any receipts and documentation for at least six years. If the Canada Revenue Agency (CRA) reviews your return, you will need your receipts to support your claims.

For more information on filling a return please visit: Canada Revenue Agency on Sending a Return

2013 Donation Tax Credit Rates

April 5, 2013 By Nigel Monahan Leave a Comment

	First $200	Amount over $200	Tax Credit for donation of $1,000	Combined Fed/Prov Tax Credit for donation of $1,000	Empl income required to completely utilize tax credit	Combined Fed/Prov Tax Credit for donation of $1,000	Empl income required to completely utilize super credit
Federal	15.00%	29.00%	$262.00	n/a		n/a
Fed-super credit	40.00%	54.00%	512.00	n/a		n/a
AB ⁽³⁾	10.00%	21.00%	188.00	$450.00	$20,725	$700.00	$20,725
BC	5.06%	14.70%	127.72	389.72	14,742	639.72	16,531
MB	10.80%	17.40%	160.80	422.80	14,742	672.80	16,531
NB ⁽¹⁾	9.10%	17.95%	161.80	423.80	14,742	673.80	16,531
NL	7.70%	13.30%	121.80	383.80	14,742	633.80	16,531
NS	8.79%	21.00%	185.58	447.58	14,742	697.58	16,531
NT	5.90%	14.05%	124.20	386.20	16,631	636.20	16,631
NU	4.00%	11.50%	100.00	362.00	15,892	612.00	16,531
ON ⁽²⁾	5.05%	11.16%	99.38	361.38	14,742	611.38	16,531
PE	9.80%	16.70%	153.20	415.20	14,742	665.20	16,531
QC	20.00%	24.00%	232.00	494.00	16,077	744.00	16,312
SK	11.00%	15.00%	142.00	404.00	17,568	654.00	17,568
YT	7.04%	12.76%	116.16	378.16	14,742	628.16	16,531

The rate for the tax credit for the first $200 of donations is the lowest personal tax rate, except for Québec. The rate for the tax credit for donations in excess of $200 is the highest personal tax rate, except for Alberta, Ontario and New Brunswick.

The Federal First-Time Donor’s Super Credit (FDSC) is proposed by the 2013 Budget, and is only available in certain circumstances.

The table above shows how much employment income is needed in order to fully utilize the regular tax credit or super tax credit for $1,000 of donations. This is if the taxpayer has only the basic personal amount tax credit, employment amount tax credit, and tax credits for employment insurance premiums and CPP or QPP contributions. When the taxpayer has other tax credits such as disability tax credit, age amount credit, dividend tax credit, dependent children tax credit, or any other tax credits, a higher level of income will be required to fully utilize the tax credit for $1,000 of donations.

Note that donations can be carried forward, but not the First-time Donor Super Credit. The tax credit rate for carried-forward donations when claimed in a subsequent year will be the rates in effect for that year.

⁽¹⁾^{NB does not use the highest personal tax rate of 14.3% for donations over $200. The NB Income Tax Act s. 25 was revised to set 17.95% as the rate to be used for donations over $200 for 2009 and later years.}⁽²⁾^{ON does not use the highest personal tax rate of 12.16% for donations over $200. The Taxation Act, 2007, s. 21 was revised to set 11.16% as the rate to be used for donations over $200.}⁽³⁾^{Alberta has only one tax rate, so sets a rate of 21% for donations over $200.

(4) Québec does not use the lowest tax rate of 16% for the first $200 of donations, but the middle tax rate of 20%.}

Statement from the CRA

April 5, 2013 By Nigel Monahan Leave a Comment

The following statement was released by the CRA related to recent media coverage of a list of Canadians with assets offshore.

The CRA is consulting other jurisdictions and is working to obtain the information referred to in the media today. The CRA will review all information it receives and aggressively pursue all suspected cases of tax avoidance and evasion.

Combating international tax evasion is essential to maintaining the integrity of the tax system. The CRA would like to take this opportunity to assure Canadians that we are working diligently to identify, prevent, and take action on any credible information that is provided to us.

When income and assets are hidden in foreign jurisdictions, all Canadians suffer as a result of tax evasion.

Failure to report income from domestic or foreign sources is illegal, and Canadians should know that the CRA actively pursues cases of non-compliance. Tax evasion and avoidance can lead to penalties, interest, fines, and even jail time.

Canadians should come forward if they have information on suspected cases of tax avoidance or evasion through our Informant Leads Program, either by phone at 1-866-809-6841 or over the Internet at www.cra.gc.ca/leads.

Canadians should also take this opportunity, if necessary, to correct their own tax affairs through the use of the Voluntary Disclosure Program (www.cra.gc.ca/voluntarydisclosures).”