Budget 2018

Income tax policy, rules, problems, strategy and software. Property and consumption taxes too.
User avatar
Peculiar_Investor
Administrator
Administrator
Posts: 13271
Joined: 01 Mar 2005 14:52
Location: Calgary
Contact:

Budget 2018

Post by Peculiar_Investor »

The date for the federal 2018-19 budget has been announced, Morneau to deliver next federal budget on Feb. 27 - Article - BNN.

A bit of a primer from Jamie Golombek, Here are the tax changes to watch out for in the upcoming federal budget | Financial Post. :oops:

Personally I think it is a mugs game to try and predict what's coming and if you should take any actions in advance of knowing the details.
Last edited by Peculiar_Investor on 14 Feb 2018 07:05, edited 1 time in total.
Imagefiniki, the Canadian financial wiki New editors wanted and welcomed, please help collaborate and improve the wiki.

Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

Re: Budget 2018

Post by ghariton »

It's worth pointing out that Jaime Golombek's piece is a year old.

This year's budget is said to pursue gender equality, perhaps by being quite unequal. Tax breaks for corporations that have a certain percentage of women on their boards? Zero-rating GST/HST on feminine hygiene products?

The biggies as far as I'm concerned are the capital gains inclusion rate, tax breaks for investing in qualifying infrastructure projects, and perhaps penalties on certain forms of unoccupied foreign-owned housing. But I wouldn't act on any of this.

George
The juice is worth the squeeze
User avatar
Peculiar_Investor
Administrator
Administrator
Posts: 13271
Joined: 01 Mar 2005 14:52
Location: Calgary
Contact:

Re: Budget 2018

Post by Peculiar_Investor »

ghariton wrote: 14 Feb 2018 01:35 It's worth pointing out that Jaime Golombek's piece is a year old.
Oops. I had used Google to search for Budget 2018 and didn't carefully check the article date. Thanks George for spotting the error.
Imagefiniki, the Canadian financial wiki New editors wanted and welcomed, please help collaborate and improve the wiki.

Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Budget 2018

Post by AltaRed »

Peculiar_Investor wrote: 14 Feb 2018 07:07
ghariton wrote: 14 Feb 2018 01:35 It's worth pointing out that Jaime Golombek's piece is a year old.
Oops. I had used Google to search for Budget 2018 and didn't carefully check the article date. Thanks George for spotting the error.
I noticed that, but I found it a bit calming in that much of what was "in play" then is still in play now. That said, I don't think this year's budget will be too disruptive (CCPC issues aside) given the broad unknowns about NAFTA. No broad tax increases for example especially because of the US tax cut. I suspect there could be something as George said to subdue the housing craziness. Windfall profits tax perhaps on certain transactions?

I expect there will be some Liberal 'social agenda' window dressing and because no one is looking, it might include capital gains inclusion rate changes to punish the presumed rich. Those things often happen when they are least expected.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
tdiddy
Contributor
Contributor
Posts: 62
Joined: 18 Jan 2015 11:28

Re: Budget 2018

Post by tdiddy »

With all the uncertainty regarding NAFTA, US tax changes etc seems like it would be pretty bold/stupid to introduce higher cap gains taxes at this point?
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Budget 2018

Post by AltaRed »

tdiddy wrote: 14 Feb 2018 14:32 With all the uncertainty regarding NAFTA, US tax changes etc seems like it would be pretty bold/stupid to introduce higher cap gains taxes at this point?
I don't think these are related. CG taxes mainly affect 'rich' capital and real property investors and would be consistent with socialist 'leveling the playing field' for the middle class, or should I say, the working class.

Ottawa already knows many/most Canadians don't use all their RRSP and TFSA capacity, so why would those same working class Canadians have the financial capacity to be a rich landlord or to have fat non-reg brokerage accounts where CG taxes come into play?

No crystal ball on my part. A cynic or skeptic perhaps.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
tdiddy
Contributor
Contributor
Posts: 62
Joined: 18 Jan 2015 11:28

Re: Budget 2018

Post by tdiddy »

The general thought behind lower capital gains taxes is to promote business investment no? We lost competitiveness with USA for foreign investment, I think these must be related somehow.
User avatar
patriot1
Veteran Contributor
Veteran Contributor
Posts: 4883
Joined: 28 Feb 2005 03:53

Re: Budget 2018

Post by patriot1 »

Never before have Canadian households had so much of their net worth in housing relative to stocks and fixed income (which includes RRSPs and pension plans). IMHO if the feds are going to make any changes to the capital gains inclusion rate it should increase it for small RE holdings (I'm not advocating getting rid of the principal residence exemption).
goleafsgo
Contributor
Contributor
Posts: 46
Joined: 01 Nov 2016 14:52

Re: Budget 2018

Post by goleafsgo »

I thought I was the only crazy one around here so it was interesting for me to see patriot1 mention the once-untouchable topic of the principal residence exemption. I think it is a little early and don't believe we will see it in the 2018 budget but I do believe that with the frat-boy we have in the PMO that Canadians should prepare for the exemption to become not-so-untouchable. When it happens I believe it will be done incrementally over a number of years.

I also think a couple of other areas the government may look in order to improve their bottom line may include:

1) lottery winnings (which I don't disagree with-never understood why someone would be peeved about receiving $12-13-14 million after being taxed on
their $20 million prize)
2) changes to TFSA contribution limits (perhaps a lifetime cap)....it seems TFSAs may become a victim of their own success

If I had to get blood from a rock then I would most certainly hire the Liberals.
tdiddy
Contributor
Contributor
Posts: 62
Joined: 18 Jan 2015 11:28

Re: Budget 2018

Post by tdiddy »

I'd like to see a cap on PR exemption. A much larger subset of younger generations are going to be lifelong renters, giving people massive tax shelters in the form of home/mansion etc is a bit much imho; I don't see why Canadians need further incentive to buy expensive homes.

If taxes are going up otherwise, I'd also like to see a more punitive estate/inheritance tax on amounts >5 million (including real estate). This is a more reasonable method to reduce inequality without getting to ridiculous income tax brackets... let the new generation earn a bit more of their wealth.
User avatar
patriot1
Veteran Contributor
Veteran Contributor
Posts: 4883
Joined: 28 Feb 2005 03:53

Re: Budget 2018

Post by patriot1 »

tdiddy wrote: 14 Feb 2018 16:43I'd like to see a cap on PR exemption.
The added taxation resulting from such a cap would be borne almost entirely by the Toronto and Vancouver areas. Pretty toxic for any party that wants to win these metros.
ig17
Veteran Contributor
Veteran Contributor
Posts: 3418
Joined: 21 Feb 2005 20:54

Re: Budget 2018

Post by ig17 »

tdiddy wrote: 14 Feb 2018 16:43 I'd like to see a cap on PR exemption. A much larger subset of younger generations are going to be lifelong renters, giving people massive tax shelters in the form of home/mansion etc is a bit much imho; I don't see why Canadians need further incentive to buy expensive homes.
:thumbsup:

Housing costs as % of income in the UK. I'd love to see a similar chart for Canada. I doubt it looks much different.

Image

This is what boomers are currently entitled to:

100% PR exemption.
OAS at 65.
Overly generous phase-out provisions for OAS.
Lack of a means test for OAS.

Younger generations are/will be paying for all of the above, while struggling with rents. This is untenable. Time to wake up and start voting accordingly.
Last edited by ig17 on 15 Feb 2018 08:04, edited 1 time in total.
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: Budget 2018

Post by kcowan »

patriot1 wrote: 14 Feb 2018 20:23
tdiddy wrote: 14 Feb 2018 16:43I'd like to see a cap on PR exemption.
The added taxation resulting from such a cap would be borne almost entirely by the Toronto and Vancouver areas. Pretty toxic for any party that wants to win these metros.
They just need to make the PR exemption to be the average for the metro area. So $1 million in Vancouver and $150k in Regina. Then when someone buys a $10 million property on the waterfront in West Vancouver and resells it for $30 million, $19 million will be taxed as regular income (not Cap Gains). This will make the CRA job much easier.
(I understand that real estate commissions will be a deduction.)
For the fun of it...Keith
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: Budget 2018

Post by brucecohen »

kcowan wrote: 15 Feb 2018 07:13 [They just need to make the PR exemption to be the average for the metro area. So $1 million in Vancouver and $150k in Regina. Then when someone buys a $10 million property on the waterfront in West Vancouver and resells it for $30 million, $19 million will be taxed as regular income (not Cap Gains). This will make the CRA job much easier.
Too hard to administer unless those owning PRs on budget day are grandfathered. How would someone who has owned a home for 40 years know/find out the average for his area at time of purchase? And is that average sale price or average value per tax roll assessment? The former is a lousy base because it's so skewed by high- and low-value properties that are not average. The latter is an unfair base because tax assessments often run below market. Killing the exemption for only new purchases makes administration easy since buyers would know to document their cost but would be unfair to millenials and also would not generate really meaningful revenue for many years.

One easy fix would be to limit PR to properties held for at least x years, maybe 2 years.* That would end a lot of flipping and kill small builders who construct a home and occupy it only long enough for it to be sold.

* Maybe not so easy. There would have to be special rules for military personnel and others subject to employer-ordered transfer. But then that begs the need for special rules governing the self-employed, etc, etc.
gobsmack
Contributor
Contributor
Posts: 447
Joined: 04 Sep 2015 13:16

Re: Budget 2018

Post by gobsmack »

Perhaps it would make sense to only offer the PR exemption on the portion of the capital gain that is used to buy another house within a certain time frame (e.g., 6 months). If someone is cashing out of the real-estate market, maybe he should pay the full tax on the capital gain.
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Budget 2018

Post by AltaRed »

brucecohen wrote: 15 Feb 2018 09:46 One easy fix would be to limit PR to properties held for at least x years, maybe 2 years.* That would end a lot of flipping and kill small builders who construct a home and occupy it only long enough for it to be sold.

* Maybe not so easy. There would have to be special rules for military personnel and others subject to employer-ordered transfer. But then that begs the need for special rules governing the self-employed, etc, etc.
That is one thing I've thought about for years. There could be workable solutions albeit imperfect as any rules on anything are. The key is to get rid of speculators and flippers. Not only is 'time' a key element here, but also whether the property is occupied. There are certain streets/areas in our big cities where many of the houses are empty most of the time without a residential presence. But we have digressed back into the housing debate....in a Budget thread. Best to take the housing debate back to the Housing thread.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
izzy
Veteran Contributor
Veteran Contributor
Posts: 3019
Joined: 19 Feb 2005 19:06
Location: Winnipeg MB

Re: Budget 2018

Post by izzy »

I hate to point out the obvious here but since only one principle residence exemption is available at any one time to any family unit (husband/spouse) and the exemption is largely useless to non tax residents of Canada,just where is the opportunity for abuse?Flipping houses is a business and there already rules to disallow exemptions in the case of RRSPs and TFSAs in such situations which I've no doubt CRA would use in abusive cases.No need to reinvent the wheel.
"I disagree strongly with what you say, but I will defend to the death your right to say it."
nisser
Veteran Contributor
Veteran Contributor
Posts: 2079
Joined: 11 Nov 2007 21:24

Re: Budget 2018

Post by nisser »

I have been and will always be a big fan of inheritance taxes. Equality is getting worse with each passing day and this is a simple way to reduce it AND encourage spending and growth in the economy. Even a 100,000$ is huge. Even capping it at something like 1$ million is an exorbitant amount and if someone's offspring manages to fuck that up and squander it, then maybe they should have spent more of that money raising their kids properly.
User avatar
nomad
Contributor
Contributor
Posts: 180
Joined: 24 Jan 2014 13:27
Location: X-QC now ON

Re: Budget 2018

Post by nomad »

nisser wrote: 15 Feb 2018 12:09 I have been and will always be a big fan of inheritance taxes. Equality is getting worse with each passing day and this is a simple way to reduce it AND encourage spending and growth in the economy. Even a 100,000$ is huge. Even capping it at something like 1$ million is an exorbitant amount and if someone's offspring manages to fuck that up and squander it, then maybe they should have spent more of that money raising their kids properly.
I absolutely disagree with the idea of an inheritance tax, at least for folks with a net worth of a few million in retirement who have already paid taxes on income all their lives. Why should the government have a special claim on squandering what I had put together over a lifetime.
Not all those who wander are lost... J.R.R. Tolkien
tdiddy
Contributor
Contributor
Posts: 62
Joined: 18 Jan 2015 11:28

Re: Budget 2018

Post by tdiddy »

nomad wrote: 15 Feb 2018 12:33 Why should the government have a special claim on squandering what I had put together over a lifetime.
Why should the government be able to take > 50% of what I earn every year? And then charge me GST/PST on whatever I spend on whats left over?

I think the actual person earning the money has more complaints wrt taxation than trust fund kids.

As I'm writing this I'm watching a teenager drive into the ICBC office next door in a lambo presumably to take driver's test :shock:
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: Budget 2018

Post by AltaRed »

izzy wrote: 15 Feb 2018 11:43 I hate to point out the obvious here but since only one principle residence exemption is available at any one time to any family unit (husband/spouse) and the exemption is largely useless to non tax residents of Canada,just where is the opportunity for abuse?Flipping houses is a business and there already rules to disallow exemptions in the case of RRSPs and TFSAs in such situations which I've no doubt CRA would use in abusive cases.No need to reinvent the wheel.
Not so much concerned about those being lived in on a continuous PR basis, but how about all those greedy investors who put down a deposit on new condo construction with the intent to sell/flip at time of closing? Or those that buy up a bunch of condos under construction and leave them empty... or under short term rental until they can sell them at large profits? What do you think is happening in GTA or GVR?

What about those big houses that are mostly empty and not lived in on a regular basis? A few blocks away from my brother-in-laws house in Montreal, there are streets of big houses with either no one in them, or mostly non-residents if there is anyone at all? Maybe those same Lebanese who cried foul when the Canadian gov't wouldn't rescue them when the heat was on in Beirut?

Regardless, getting back to the topic at hand, there are a handful of areas where gov't could siphon off additional taxes without hurting their voting base more than a sliver.
Last edited by AltaRed on 15 Feb 2018 13:01, edited 1 time in total.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
Mordko
Veteran Contributor
Veteran Contributor
Posts: 6327
Joined: 24 Jan 2016 09:26

Re: Budget 2018

Post by Mordko »

Inheritance taxes are unfair and bad for the economy, which is why they will probably be implemented. Inheritance taxes undermine small private businesses, including farming. Of course really wealthy individuals always find a way around them.

Capital gains tax on private property makes total sense so unlikely to be implemented. There is no reason why one class of assets should be treated any different from all the rest - unless you actually want to create a speculative environment and bubbles in housing.
brucecohen
Veteran Contributor
Veteran Contributor
Posts: 13310
Joined: 20 Feb 2005 16:47

Re: Budget 2018

Post by brucecohen »

Mordko wrote: 15 Feb 2018 13:00 Inheritance taxes are unfair and bad for the economy, which is why they will probably be implemented. Inheritance taxes undermine small private businesses, including farming. Of course really wealthy individuals always find a way around them.
It depends on the level at which the tax kicks in. Warren Buffet, Bill Gates, George Soros and some others of their ilk have argued that inheritance tax on the truly wealthy like them is GOOD for the economy because it promotes more efficient allocation of capital. As Buffet put it last year: "I don't think we should have our 'Olympic team' 20 years from now be the eldest sons of the Olympic team currently." As for family farms, U.S. Republicans kept trotting that out in their war on the estate tax but failed to come up with even one modern case in which a family farm had to be sold because the threshold was $11 million. This Iowa agricultural economics professor has been studying the issue for decades and has not turned up one case in which estate forced the sale of a family farm.
Capital gains tax on private property makes total sense
Not necessarily as applied to a genuine family home. Home prices in, say, Ottawa have risen but not by as much as those in Toronto. Consider the case of someone transferred from Ottawa to TO. Taxing proceeds of the Ottawa home sale makes the already difficult challenge of buying a GTA home even harder because the family would have less money. Also consider the common situation in which proceeds from the sale of an elderly person's home are what he/she uses to pay for room and board in a retirement or nursing home.
There is no reason why one class of assets should be treated any different from all the rest
So said the Carter Royal Commission decades ago: "A buck is a buck is a buck." Among other things, Carter would have fully taxed capital gains though ACBs would be inflation-indexed. Carter, one of Canada's most respected accountants and a member of Toronto's high society, was ostracized by the monied class.

FYI: Canada had a federal estate tax until 1972. The govt scrapped it because it was very hard to administer and I recall that some court battles over it were still active in the early '90s. Also, federal-provincial agreements gave Ottawa only 25% of the revenue, according to A Fiscal History of Canada. The 1971 budget which killed the estate tax was also the one that introduced capital gains tax.
longinvest
Veteran Contributor
Veteran Contributor
Posts: 3956
Joined: 10 Sep 2012 17:26
Location: QC

Re: Budget 2018

Post by longinvest »

brucecohen wrote: 15 Feb 2018 14:20
There is no reason why one class of assets should be treated any different from all the rest
So said the Carter Royal Commission decades ago: "A buck is a buck is a buck." Among other things, Carter would have fully taxed capital gains though ACBs would be inflation-indexed.
How logical. That's how it should be!

brucecohen wrote: 15 Feb 2018 14:20 Carter, one of Canada's most respected accountants and a member of Toronto's high society, was ostracized by the monied class.
It's really sad that our politicians can't follow the well-thought and logical conclusions of a Royal Commission, yielding, instead, to lobbyists.
Variable Percentage Withdrawal (finiki.org/wiki/VPW) | One-Fund Portfolio (VBAL in all accounts)
User avatar
Mordko
Veteran Contributor
Veteran Contributor
Posts: 6327
Joined: 24 Jan 2016 09:26

Re: Budget 2018

Post by Mordko »

brucecohen wrote: 15 Feb 2018 14:20 Warren Buffet, Bill Gates, George Soros and some others of their ilk have argued that inheritance tax on the truly wealthy like them is GOOD for the economy because it promotes more efficient allocation of capital.
Don't believe there is a law which would prevent Buffet, Gates and Soros from transferring their estates to the government.

Also, I am yet to see any evidence that governments allocate other peoples' money more efficiently than privately owned businesses allocate their own money.

Finally, there is little chance that billionaires' children will be on the Olympics roaster of tomorrow. Neither Buffet, Gates, Soros, Zuckerberg nor Bezos inherited their money. See the trend?
Also consider the common situation in which proceeds from the sale of an elderly person's home are what he/she uses to pay for room and board in a retirement or nursing home.
Sure. Also let's consider the proceeds from the sale of their investments. Why should one be taxed and not the other?

As for relocation - there is no actual requirement to move to and own a home in Toronto.
Post Reply