Chapter 4-Canada’s New Government Announces Tax Fairness Plan

The new Tax Fairness Plan is intended for the Canadians. It’s a plan designed to level the playing field between income trusts and corporations. The new Tax Fairness Plan is necessary to restore balance and fairness to Canada’s Tax System. They are necessary to ensure our economy continues to grow and prosper. They are necessary to bring Canada in line with other throughout the world. The plan is the result of months of careful consideration and evaluation. The actions are clear, crucial for all Canadians. The provisions is to reduce the level of taxation on corporate dividends, the landscape has changed dramatically over short period of time. Top Canadian corporations, operating within the current rules, have announced their purpose to adapt to the income trusts. If corporations don’t pay their share of taxes, this tax weight will raise onto the shoulders of hardworking individuals and families.

Taxes should be equitable, or fair. One approach to defining equity is to insist that all individuals who are in similar circumstances pay the same amount of tax. The problem in terms of equity arises where individuals in different circumstances are concerned. Even though income tax provides the greatest source of revenue for government, it is agreed that those with higher incomes should pay more tax. First, the government is recommend to apply a Distribution Tax from publicly traded income trusts. This will level between trusts and corporations. Secondly, the general corporate income tax rate as part of Tax Fairness Plan will be reduced. As an outcome of this measure, there will not be more government revenue produced from the corporate sector. Thirdly, the government increases the Age Credit Amount. This measure will provide tax aid for low and middle-income seniors. The Tax Fairness Plan will distribute more than a billion dollars of new tax relief yearly for Canadians.

Even thought someone with a higher income pays more in taxes than someone with a low income, the sacrifice that each has to make in paying taxes is though to be the same. With the regressive approach, the low income individual pays a higher percentage of income in taxes and thus is making more of a sacrifice than someone in a higher income tax group. There are different tax rates for different types of income. Government tax policy also has to be consistent with a desire for economic development. Equalization payments are to provide a reasonable level of public services without resorting to extremely high levels of taxation in order to get the money for the services. Equalization payments are not the only sources of money transfer between the provinces. The federal government makes equalization payments to some provinces.

Overall, it is agreed that individuals with similar circumstances should pay the same amount of taxed. It is not agreed, however, how individuals in different circumstances should be treated. Canadians find themselves with a tax system that is less fair and an economy that is less productive and competitive. Left unchecked such corporate decisions would result in billions of dollars in less revenue for the federal government to invest in the priorities of Canadians, including more personal income tax relief. These decisions would also mean less revenue for the provinces and territories, several of which have made representations for the Canadians. I think that this situation is not right and it is not fair. It is the responsibility of the Government of Canada to set our nation’s tax policy, not corporate tax planners.

Link: http://www.fin.gc.ca/news06/06-061e.html