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Share this Story: Allan Lathier: Liberals want to impose minimum tax There is already a minimum tax
Allan Lanthier: Liberals want to impose minimum tax We already have a minimum income tax. The Liberal proposal could deny donations credits to individuals who already pay the minimum tax. Photo by Johannes Eisele/AFP via Getty Images
Article content Wednesday's Liberal election platform is a mess. Its 82 pages include more than 100 spending promises as well as new taxes that will ensure everyone pays their fair share. This is curious as Canada already has a minimum income tax, which was established 35 years ago in 1986.
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Article content. The platform claims that the Liberals will establish a minimum tax rule to ensure that all top-ranking taxpayers pay at least 15% of the federal rate. This would eliminate their ability to artificially avoid paying any tax by using deductions or credits.
Tap here to view other videos by our team. Refresh your browser or Allan Lanthier: Liberals want to impose minimum tax. A minimum tax is already in place. A minimum tax of 15% was introduced by the Conservative government in 1986 for exactly the same reason. High-income people pay more tax if they take advantage of too many of the tax incentives that Parliament has provided over the years. Start with the taxable income, as determined otherwise, and then add various tax preferences and deductions such as capital gains, stock options deductions, and losses from tax shelters. This adjusted amount is subject to a 15% tax. This is important to understand the Liberal proposal tax credits, which include the donation credit. They then reduce the minimum tax.
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Article content What could a new tax do to make the tax more effective? According to Ottawa, charitable donations might be one of the targets. Individuals who already pay the minimum tax might be denied donation credits under the Liberal proposal. This could also affect high-income philanthropists. Janice may think that she has enough money after a successful career. Janice makes $1 million per year and gives $750,000 to charity (the donation credit has a cap of 75 percent of her income). The federal tax she pays on the $250,000 remaining (at 33%) is $82,500, which gives her an average tax rate of eight percent on her $1,000,000 of income. Janice would owe $150,000 minimum tax if Janice accepts the Liberal proposal and her average tax rate is 15%. Janice may decide to reduce her donations so that her federal tax under regular rules is $150,000.
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Article content Buffett gave US$100 million to five foundations over the past six years. He responded to a question during his company's annual general meeting 2010 that he stated, "If you want to give all your money away, it is a fantastic tax dodge." Is Buffett really liable for tax on the money he gives to charitable causes, but doesn't spend? Buffett stated that he prefers to give his money to charities over the government. This may be part our September 20 ballot question, whether it is related to child care, family income or charitable donations. Are you ready for the government to create massive tax-andspend programs? Would you rather that people take more responsibility for their spending decisions? These questions could determine how we vote. Allan Lanthier, a former partner in an international accounting firm, has served as an advisor to the Canada Revenue Agency and the Department of Finance.
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