March 3rd, 2018
Peter Wiesner CPA, CA
Licensed Public Accountant
Thanks for visiting this page. The personal tax season has started. For current clients please feel free to drop off your peronal tax package once you are ready. Also, a few spaces are available for new clients and referrals.
Please email or call me now for further information and or to book an appointment.
Please note that no new clients will be accepted during the month of April 2018.
Have a happy tax filing season.
___________________________________________________________________Ontario Budget Date
Ontario Sets Budget Date for March 28, 2018.
Ontario Budget CommentaryMarch 28, 2018
A list of specific items of interest from the 333 page Ontario Budget released.
On March 28, 2018 Finance Minister Charles Sousa tabled his sixth Budget.
The budget has minor tax increases, but is essentially a spender’s budget.
Some of the statistics contained in the budget are as follows;
- the unemployment rate is at 5.5 per cent, the lowest in 17 years.
- interest on the debt expense cost 8 cents of every dollar of revenue
- Government is using average annual rate of revenue growth at 3.7 per cent in the
budget figures being presented on a go forward basis.
- total budget expenses are currently projected to be $149.5 billion
- Ontario deficit increased by $6.6 billion dollars as Ontario’s net debt is projected to be
$308.2 billion as of March 31, 2018 ($301.6 billion as of March 31, 2017).
- projected debt at the end of March 31, 2019 is $325.04 Billion (page 229 of the budget).
- the government is projecting annual deficits $6.6 billion in 2019–20 and $6.5 billion
- Ontario’s net debt‐to‐GDP ratio is at 37.1 per cent in 2017–18.
Measures Affecting Individuals
Personal Income Tax Bracket Changes and Surtax Elimination
The government is proposing to eliminate the surtax and make adjustments to the Personal Income tax brackets and rates effective for the 2018 tax year.
As a result of the proposed changes, Ontario’s Personal Income Tax (PIT) would become more progressive.
Ontario’s personal income tax revenue would increase by $275 million in 2018–19, while the top marginal Personal Income Tax rate of 20.53 per cent is maintained.
This increased revenue would help support key initiatives within the Budget.
Ontario is one of only two remaining Canadian jurisdictions with a personal income tax surtax. Over 83 per cent of Ontario’s 11 million tax filers, or about 9.2 million individuals, would not see any increase
in their PIT as a result of the proposed changes and many would pay less.
Ontario currently has five statutory PIT rates plus two surtax rates calculated separately.
The proposed changes would create seven statutory Personal Income tax rates applied directly to taxable income, and simplify the PIT -Personal Income Tax calculation.
Measures Affecting Individuals- Continued
Along with the removal of the surtax, the tax brackets are being changed with lower values so that more funds would be raised.
So it may be simpler, but with the tax brackets being lowered your income tax goes up to a higher bracket sooner and thus more tax revenues of $275 million are going to be generated.
Personal Income Tax withholdings would start on July 1, 2018.
In 2018, 8.6 million tax filers would not be affected by the proposed changes. Approximately,1.8 million individuals would pay about $200 more Personal Income Tax on average.
To enhance support for charitable giving, the government is also proposing to increase the top rate of the non‐refundable OCDTC, which provides relief to taxpayers who make eligible charitable donations.
Currently, an OCDTC rate of 5.05 per cent applies to the first $200 in donations and a rate of 11.16 per cent for donations that exceed $200.
Measures Affecting Business
Targeting the Employer Health Tax Exemption to Small Employers
As announced in the 2017 Budget, the government will propose measures to better target the Employer Health Tax (EHT) exemption.
The EHT exemption relieves more than 85 per cent of Ontario employers from having to pay the EHT. The exemption is available to employers who would not be eligible for small business relief under the federal Income Tax Act (ITA) through the Small Business Deduction (SBD). Ontario proposes to follow the eligibility criteria for the SBD for the EHT exemption. As a result, the exemption would only be available to individuals, charities, not‐for‐profit organizations, private trusts and partnerships, and Canadian‐controlled private corporations. Ontario would incorporate federal anti‐avoidance rules related to the multiplication of the SBD into the Employer Health Tax Act. In implementing these measures, Ontario would also determine the EHT rate for associated employers in a way that is consistent with the application of the EHT exemption threshold for these employers.
These changes would result in over 20,000 Ontario employers paying $2,400 more EHT per year on average. These 20,000 employers would on average pay additional EHT of less than one per cent of their payroll.
If enacted, this proposal will take effect on 1 January 2019. Ontario will provide a period for public consultation before introducing legislation for the anti-avoidance measures.
Measures Affecting Business -Continued
Income Sprinkling Rules Matched to The Federal Budget
Income sprinkling involves diverting income from a high‐income individual to family members in whose hands the income would be taxed at lower combined federal–provincial Personal Income Tax rates.
Currently, income shifted to minor children is taxed at the highest combined federal–provincial Personal Income tax rate — also known as tax on split income.
The federal government is proposing to address income sprinkling by extending the tax on split income rules to adult family members who are not active in the business, with certain exceptions, beginning with the 2018 taxation year.
Ontario will automatically parallel these changes once federal amendments are approved and apply its top PIT rate of 20.53 per cent to split income received by an adult family member.
The Small Business Limit Penalty for Those with Successful Holding Companies
Ontario’s small business deduction reduces the Ontario general Corporate Income Tax rate for small Canadian controlled private corporations (CCPCs) and associated corporations, on up to $500,000 of qualifying active business income.
The $500,000 business limit is phased out on a straight‐line basis for CCPCs (and associated corporations) that have between $10 million and $15 million of taxable capital employed in Canada.
The 2018 federal budget proposed an additional phase out of the federal small business limit.
Effective for taxation years beginning after 2018, the federal small business limit would also be phased out on a straight‐line basis for CCPCs (and associated corporations) that earn between $50,000 and $150,000
of passive investment income in the taxation year. The business limit of a corporation would be the lower of the business limit determined on the basis of taxable capital and the business limit determined on the basis
of passive investment income. Ontario proposes to parallel the federal measure on passive investment income.
The Ontario Research and Development Tax Credit
Ontario businesses, including large manufacturers, are constantly looking for ways to improve their operations and implement advanced technologies that bring value to their firms.
To support large businesses in making long‐term, significant investments in R&D, the government proposes to enhance the Ontario Research and Development Tax Credit (ORDTC).
This additional support would encourage large companies to continuously invest in R&D, spurring innovation in the Ontario economy.
The ORDTC is a 3.5 per cent non‐refundable tax credit on eligible R&D expenditures. Effective for eligible R&D expenditures incurred on or after March 28, 2018, companies that qualify for the ORDTC
would be eligible for an enhanced rate of 5.5 per cent on expenditures over $1 million in a taxation year. The $1 million threshold would be prorated for short taxation years.
This enhanced tax credit rate would not be available to businesses where eligible R&D expenditures in the current taxation year are less than 90 per cent of eligible R&D expenditures in the prior taxation year.
Eligible R&D expenditures in short taxation years would be increased to the full year equivalent. For the purposes of calculating eligible R&D expenditures in the prior taxation year, when a corporation is amalgamated with,
or wound up into, another corporation, each predecessor corporation’s eligible R&D expenditures would be considered transferred to the successor.
The enhanced tax credit rate would be prorated for taxation years straddling March 28, 2018.
Combatting the Underground Economy
The government is increasing attention to the underground economy.
When people and businesses avoid paying taxes, everyone else is left to make up the shortfall. This puts the competitiveness of legitimate businesses at risk, and gives some businesses an unfair advantage.
That is why the government is continuing to deliver on its commitment to fight the underground economy.
The government proposals include;
-programs aimed at addressing tax non‐compliance,
-education campaign that informs the public on how participation in the underground economy puts people at risk of poor workmanship,
lack of warranty, fraud, personal liability, and health and safety issues.
Combatting the Underground Economy -Continued
Electronic sales suppression (ESS) involves the manipulation of point‐of‐sale systems for the purposes of underreporting income. the Province will introduce legislation to address the practice of ESS.
The legislation would require prescribed businesses to update their electronic cash register systems to meet legal requirements that will stop the ability to manipulate sales transaction information.
Unregulated tobacco products can be purchased for as little as a few dollars, and evidence suggests that profits are sometimes used to fuel other criminal activity. These activities result in a loss of revenue that is
needed to support important government services like health care and education, and create unfair competition for those businesses that comply with Ontario laws.
That is why the government is committed to addressing unregulated tobacco through a balanced approach of enforcement and partnerships, which includes working with Crime Stoppers to raise consumer awareness.
Increasing Tobacco Taxes
Ontario’s tobacco tax will increase from 16.475 cents to 18.475 cents per cigarette and per gram of tobacco products other than cigars, effective 12:01 a.m., March 29, 2018.
These changes are equivalent to $4 per carton of cigarettes. The government plans to further increase the tobacco tax rate by an additional $4 per carton of cigarettes in 2019.
Easing Land Transfer Tax Reporting Requirements for Certain Dispositions
Ontario plans to make a new regulation that would allow land transfer tax arising from certain unregistered dispositions of a beneficial interest in land through certain types of partnerships and trusts to be payable
30 days after the end of the calendar quarter in which the disposition occurred, rather than within 30 days of the disposition. This change is intended to help reduce the administrative burden on some businesses by creating reporting
and payment schedules that better meet their needs.
First Nations HST Point-of-Sale Rebate
Currently, many goods purchased off‐reserve by a Status Indian, band or band council are eligible for a rebate of the eight per cent Provincial portion of the Harmonized Sales Tax (HST).
Certain goods, such as tobacco and alcoholic beverages, are not eligible for this rebate, meaning they are subject to the full 13 per cent HST when purchased off‐reserve.
Consistent with the treatment of these goods, it is the Ontario government’s intention for the full HST to apply to off‐reserve purchases of recreational cannabis once legalized.
Working in Partnership to Support Indigenous Children and Youth
New initiatives to provide enhanced localized supports include:
Providing $5.5 million in provincial funding in the 2017–18 school year to help Nishnawbe
Expanding counselling and broader mental health supports by providing Pikangikum
First Nation with funding to hire an additional 20 mental health workers for children and
youth at risk.
Non-Profit Child Care Services in Schools
Child care facilities are often housed in tax‐exempt spaces, such as public schools, places of worship, municipal town halls or local YMCAs.
These community spaces play an important role in helping to provide child care services that are accessible and close to the communities they serve.
To ensure that non‐profit child care services do not alter the tax‐exempt status of these community properties, an amendment will be proposed to the Assessment Act to provide a tax exemption to non‐profit child care
facilities that lease space in otherwise tax‐exempt properties.
General Thrust of the Budget –Spending
Better Health Care for Everyone in Ontario: $1.3 billion over three years to ensure people have improved access to the high‐quality health care they need, to support growing demand
and implement new and innovative approaches to serving the people of Ontario.
Expanding Access to Mental Health and Addictions Services: Additional investments of $1.2 billion over three years to improve access to a full range of mental health and
addictions services for children, youth and adults across Ontario.
Making Child Care More Accessible and Affordable: $2.2 billion over three years to
continue to increase access to child care, introduce free preschool for children from the
age of two‐and‐a‐half until they are eligible for kindergarten starting in September 2020,
and phasing in a wage grid in the early years child sector.
Implementing Income Security Reform: An increase of $2.3 billion over three years to
embark on a multi‐year plan to reform income security, including increasing income
support, reducing the burden of complex rules and simplifying benefits for those accessing social assistance.
Seniors’ Healthy Home Program
In 2019–20, that would provide over $1 billion over three years to help seniors with the costs of maintaining their homes. The government’s goal is to design a benefit that provides up to $750 per year
for every eligible household led by seniors who are 75 years or older. Government is investing an additional $650 million in home care over the next three years.
Part of this investment includes $180 million in new funding that will make available 2.8 million more hours of personal support, including caregiver respite, plus 284,000 more nursing visits and 58,000 more therapy visits.
Expanding OHIP for Seniors: Almost $1 billion over three years to provide seniors with free prescription drugs beginning August 1, 2019.
Investing in Developmental Services: An additional $1.8 billion over three years to expand services and enable choice, independence and inclusion for individuals with developmental.
Expanding direct funding to the Passport program to ensure that more than 40,000
eligible people with a developmental disability will receive at least $5,000 per year,
providing choice and flexibility in receiving critical supports and services;
Social Assistance Items
Changes for those on Social Assistance include
Limits on savings in Tax-Free Savings Accounts or Registered Retirement Savings Plans (RRSP) will be eliminated, starting in September 2018.
Limits on cash and other liquid assets will increase to $15,000 for singles and $20,000 for couples receiving Ontario Works and will be fully eliminated for those receiving Ontario Disability Support
Program Benefits, effective during the 2019–20 fiscal year.
The duration of living together for the definition of a “spouse” will change from three months to three years, consistent with the Family Law Act. As a result, a social assistance recipient will be able to live with a partner
to whom they are not married, or three years before the income and assets of the partner are considered in determining eligibility for social assistance. Increasing the amount of employment income that can be earned
without impacting social assistance benefits to $400 per month from the current $200 per month, starting in fall 2018.
In 2019–20, further raising the amount that can be earned to $6,000 per year without impacting social assistance benefits. Calculating the earnings exemption on an annual
basis will help stabilize incomes of people accessing social assistance and improve employment outcomes.
This Budgetannounces additional savings for transit riders, including:
Funded by carbon allowance proceeds, the Province will work with the TTC, York Region Transit, Mississauga’s MiWay, Brampton Transit and Durham Region Transit to introduce discounts
to transit users who transfer between these municipal transit networks and the TTC. There are approximately 63,000 daily trips involving transfers between these municipal transit agencies and the TTC.
This initiative could save cross‐boundary transit commuters up to $1.50 per trip, saving regular commuters about $720 per year.
All GO Transit trips within Toronto will cost PRESTO card users just $3 per trip. In addition, PRESTO card users at stations such as Port Credit, Malton, Pickering, Ajax and Markham will also see fare reductions
when taking GO Transit back and forth to Union Station.
All GO Transit trips under 10 kilometres will cost PRESTO card users just $3 per trip anywhere on the GO Network
Ontario is continuing to make progress on the first high‐speed rail service in Canada, on the Toronto‐Windsor corridor. This would connect the GTHA to southwestern Ontario.
Regulating Financial Planners
The government is developing a framework to regulate financial planners in Ontario to help ensure that Ontarians have access to services that will assist them in reaching their financial goals.
This regulatory framework would close the gap that currently allows financial planners to perform their work without regulatory oversight or specified proficiency requirements.
It would also establish restrictions on the use of titles related to financial planning. The government has begun consulting with stakeholders in shaping the proposed framework,
beginning with the release of a consultation paper March 2018.
Election in Ontario –Get out and Vote
As an election is scheduled for June 5th, 2018, some, all, or none of these proposals may be in place by the summer time. Stay tuned for more updates.
NOTICE TO READERS
This Ontario Budget Commentary March 28th, 2018 has been prepared for educational purposes.
Peter Wiesner CPA, CA, Licensed Public Accountant nor anyone involved in the preparation or distribution of this Ontario Budget Commentary accepts any contractual,
tortuous or other form of liability for its contents or for any consequences arising from its use.
Please contact Peter Wiesner CPA, CA at 905-898-3355 before implementing any tax strategies resulting from this information
Ontario Ban on Door-to-Door Sales in Effect as of March 1st
Announced February 23, 2018
New Law to Protect Consumers at Home
Starting March 1, 2018, Ontario will ban unsolicited, door-to-door sales of certain household appliances to better protect consumers from aggressive and misleading contracting at home.
Starting on March 1, 2018 Ontario businesses will only be able to enter into a contract in the consumer's home if the consumer has contacted the business ahead of time and invited them into their home for the purpose of entering into a contract. Contracts that are in violation of the new rules relating to door-to-door contract solicitation will be considered void, and consumers will be able to keep the goods and services with no obligations.
The new rules will apply to:
Air cleanersAir conditionersAir purifiersDuct cleaning servicesFurnacesWater filtersWater heatersWater purifiersWater softenersWater treatment devicesBundles of these goods and servicesIn addition, businesses will be required to keep a record of how contact with the consumer entering the contract was made, and all contracts signed in the home for these goods and services will also have a 10-day cooling-off period, allowing consumers to cancel the contract for any reason without penalty.
Want $25 - Here You Go! Loblaws Jan 8 to May 8, 2018 Registration Submission Times -Still Time Left!!www.LoblawCard.ca
From BNN January 5, 2018
Starting Monday, Canadians can register for a $25 Loblaw gift card. The company is offering the card to compensate customers after it admitted to a bread price-fixing scheme over a 14-year span ending in 2015. As many as six million cards are expected to be issued, costing the grocery giant up to $150 million. Below, BNN takes a look at three things Loblaw may be hoping to get in exchange — and one way the company’s plan could backfire.
“The money is more symbolic of trying to provide some support to their apology,” Sylvain Charlebois, dean of Dalhousie University’s Faculty of Management and among Canada’s leading food industry experts, told BNN via telephone. “Loblaw is going to need to do way more than just give a $25 gift certificate [because] it is not just about compensating customers, it is about revisiting its social licence with the public.”
The actual amount Loblaw is offering doesn’t matter, Charlebois argues, “because the brand has been damaged. The gift card is meant to hide a much more problematic issue that relates to customer trust.”
YOUR LEGAL RIGHTS (MAYBE)
Lawyers behind a proposed class action lawsuit against several companies including Loblaw are urging Canadians to “read the fine print, and make sure you’re not giving away any rights to take part in the class action in exchange for what is basically a coupon to a grocery store.”
Loblaws insists signing up for the card will not prevent anyone from participating in any current or future potential lawsuits.
“Accepting this offer will not affect customers’ right to participate in any class action or to receive any incremental compensation that may be awarded by the court,” a company spokesperson told CTV News last week.
“For everyone wanting to redeem the gift card they will likely spend over $25 so it is a PR spin from Loblaw,” Charlebois told BNN. “It is hard to understand or appreciate just how badly customers were burned financially.”
Statistics Canada data shows the average Canadian family spends roughly $120 per week at grocery stores, suggesting the move could indeed be part of a plan to get more Canadians to spend more money at Loblaw’s stores.
The amount is also arguably just a fraction of the cash Loblaw pocketed by overcharging on bread for 14 years. Maclean’s crunched the numbers and found if Loblaw had inflated prices by just 10 per cent, then a Canadian who purchased one loaf per week over that 14-year period would have been gouged for nearly $200 in total.
For the $25 gift card to be proportional to the average customer’s loss, the price hike could not have exceeded one per cent.
HOW IT COULD BACKFIRE
It is entirely possible Canadians will not forgive Loblaw, will not give it more of their money, and will not forgo their legal right to sue — but will take the card anyway and give it away to those in need.
There are multiple campaigns online urging Canadians to sign up for the gift card for the sole purpose of donating them to local food banks across the country.
A Loblaw spokesperson told CTV News that donating the gift cards would be a “lovely idea” before immediately suggesting card holders should still go to their local Loblaw store: “With the card in hand, customers could easily buy food for themselves or for a food bank.”
From CBC March 5th, 2018
Judge Slams Canada Revenue Agency
B.C. Supreme Court judge has slammed the Canada Revenue Agency for suppressing and misstating evidence in its zeal to prosecute a Vancouver Island couple for tax evasion.
In a blistering 70-page ruling, Justice Robert Punnett ordered the CRA to pay Tony and Helen Samaroo nearly $1.7 million in damages for malicious prosecution of a deeply flawed case that ruined their reputations.
"A government agency maliciously used the criminal justice system to pursue the plaintiffs, and its wrongful conduct continued into the criminal trial itself. The CRA was seeking substantial terms of imprisonment and significant penalties. The manner in which the prosecution was initiated and carried out was egregious. It must be denounced," Punnett wrote.
"It affected the reputations of the plaintiffs, their professional lives and their family lives. It involved the concealment of exculpatory evidence. It involved the power imbalance of the state over the individual. It violated fundamental rights and was highly reprehensible."
The damages include nearly $348,000 for the legal fees the Samaroos spent to defend themselves in the 2011 provincial trial which ended in their acquittal.
They also include $300,000 for aggravated damages to each of them and $750,000 in punitive damages against the CRA.
The couple, who were both immigrants to Canada, operated a restaurant, nightclub and motel in Nanaimo.
The CRA, which has 30 days to appeal, said it would be inappropriate to comment on the judgment at this time.
The judgment describes a tax evasion case which began in 2006 with a tip. During the subsequent audit, the CRA determined that substantial cash deposits had been made to the Samaroos' business accounts.
The Samaroos claimed they had been transferring old $100 and $50 bills — from a safety deposit box full of three decades' worth of savings — into the bank because they were afraid financial institutions would no longer accept the old currency.
But investigators rejected that explanation.
They believed the couple was dodging tax by failing to report income from the restaurant.
'Argumentative, evasive, inflexible'
The investigation led to 21 charges for tax evasion. The CRA alleged the Samaroos had skimmed $1.7 million from their restaurant.
But Punnett faults CRA investigator Keith Kendal for putting forward a final report for charge approval without carrying out investigatory steps requested by a Crown prosecutor and, in doing so, providing "incomplete and erroneous information."
"As a witness, I found Mr. Kendal to be argumentative, evasive, inflexible and reluctant to concede what clearly should have been conceded. He wrote the Prosecution Report as an advocate, not an investigator," Punnett wrote.
"His clear intent was to see that criminal charges were laid. The presumption of innocence appeared to be meaningless to him. The manner in which he approached the evidence was not objective. He had his theory and he then sought to prove it."
The judge noted that Kendal testified he still believes the Samaroos are guilty of tax evasion, "and would, if given the chance, prosecute them again on the same theory and the same evidentiary basis."
Punnett said the case suggested "an unfortunate culture within the CRA."
He pointed to a primary report which cited the fact the agency hadn't prosecuted a restaurant or nightclub in Nanaimo as rationale to go ahead with the charges.
He also highlighted an email exchange in which a CRA investigative team leader pointed to press coverage by saying: "Front page of Wednesday's Nanaimo Daily News. I can't wait to read the edition after the guilty verdict."
And, in another email, Punnett noted, the same team leader joked: "Doesn't a guilty verdict call for a guillotine?"
"Here, the CRA employees looked forward with unprofessional glee to the plaintiffs' anticipated conviction and sentencing and their resulting ruination," Punnett wrote.
"It is appalling that the incarceration of the plaintiffs would be joked about."
'High-handed, reprehensible and malicious'
The Samaroos testified about the impact of the case, as did their grown son and daughter.
The couple no longer live together and Tony Samaroo said he drinks and smokes more. He claimed that he "lost his spirit and his strength" in the face of the charges.
Helen Samaroo testified that "her life was turned upside down." She felt others looked at her with suspicion and she felt embarrassed to go to the restaurant. She claimed she had a breakdown after the acquittal.
Their daughter, Tricia Miller, said she withdrew from people and "stopped using the surname Samaroo because of its association with the criminal charges."
According to the judgment, the CRA and Kendal do not acknowledge their wrongdoing or any violation of professional standards. They expressed no apology and were without remorse.
Punnett admitted that no amount of punitive damages would cause the CRA financial hardship. But he said the facts of the case deserved rebuke.
"The CRA is vicariously liable for the conduct of Mr. Kendal and its employees," he wrote. "Its conduct in this case was high-handed, reprehensible and malicious."