Tax Freedom Day

With Tax Freedom day just having been passed - it's interesting to see that the average Canadian will be paying 37.7k in taxes this year.

If you're not familiar with the term - here's the link in wikipedia Tax Freedom Day
Canada's Tax Freedom day is calculated by the Fraser Institute.

It's a shame that many of the Canadians that don't know the rules of the money game are still overspending in taxes that they can be mitigating, reducing, or avoiding (not evading). Simple tax savings strategies can be implemented by just taking a closer look at your mortgage practices, or consulting with your accountant on the benefits of having a small home based business with legitimate expenses.

When it comes to dealing with the tax man, it's what you know, or what you don't know that makes the difference between being able to be a success. Some of you might remember when Tax Shelters were a major portion of my business (they're not anymore) but proper utilization of a Tax shelter would still allow you to come out ahead if you're smart with your money.

If you're really interested in taking the first step here are the basics:
1) Take a look at your current mortgage - is it tax deductible? If not, talk to a trusted financial planner or adviser on methods how to make it such. Be sure to get some different opinions as not all tax deductible mortgage strategies are equal.

2) Talk to your accountant as to what types of expenses are allowed or disallowed and calculate what your average savings would be if you were to open your own home based business. In terms of the home based business, make sure it's something that you actually do enjoy and would like to work on to build the business as it's not just for the tax savings, but a vehicle to produce more income for you over the long term.

Those two steps alone will save the average Canadian 3 to 5 thousand dollars a year. It's not all 37k, but it's a start.

Thanks for reading,
Earl Flormata

Earl Flormata - Another potential hidden tax emerges.

Not all of the MER is a profit that goes to the mutual fund company.

CI Financial Corp. president Stephen MacPhail, whose firm is an outspoken opponent of sales taxes on investment funds, notes that the HST would be a hidden tax because of securities rules. The regulations governing the reporting of management-expense ratios require fund companies to report a single MER that includes all taxes.

Let me get this straight - because a firm is operating out of Ontario, all of its investors would be charged the 13% HST regardless of what province they lived in? And to boot, they're going to hide it from the taxpayers within the MER?

With the current state of the world economy, and everyone still pretty jumpy from the constant negative news (aka CNN) - the sheer audacity to charge a provincial sales tax on people not from the province would have me looking to other funds that weren't affected by this ruling. We're already taxed when we spend, taxed when we save, taxed when we save, taxed at death, and now a hidden investment tax? No wonder Kiyosaki is saying stay away from mutual funds, and it's getting more and more difficult for mutual fund sales people to get sales these days. Ontario is already the most difficult jurisdiction in the country to deal with - and now they're coming down and killing their own investment industry?

It's news like this that makes me glad to live in B.C. I've recently had one of my partners working directly with the BC Securities Commission (BCSC) - and from what he's told me it's been very helpful dealing with them, and they've actually saved him thousands on legal fees. Watch out Canada, because if another hidden tax hinders investments based in the East, then we may see a resurgence everywhere else across the country making offers into places other than Ontario. Alberta and their zero provincial taxes looks like an even better stomping ground for the financial corporations these days.

Thanks for reading,
Earl Flormata

Earl Flormata - Corporate Taxes in Canada still top Global Average - The Purpose of Government

Today's article reminds me of a lesson taught to me by an investment banker in discussing their thoughts on government, and the duties of the people in the government.

He starts off with a question: What is the purpose of government? I look at him as though he's asking a loaded question and he smiles, "Ok, is it the purpose of a government to create jobs, yes or no?"

I answer back, "Yes to the jobs, however not the useless paper pushing red tape covered government kind."

"Close but not quite", was his reply.

The ideal purpose of a government is to make an ideal environment for businesses to thrive. In doing so, jobs are created elsewhere and at an exponentially faster rate, while spurring the economy by collecting more taxes due to the increase in workers and overall spending throughout the country. In lowering overall taxation and making things more efficient there is actually more money to go around.

The other example I can think of this is hitting the sweet spot on pricing for your products. 5 sales at 27.99 or 3 sales at 49.99 means requiring a lower conversion rate overall. It's not a matter of pleasing everyone, but more so a matter of being efficient for the greater good of the country.

What are your thoughts on the corporate side of the tax game?

Thanks for Reading,
Earl Flormata