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March 28, 2023

Tax Perspectives

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Please note that these publications may not be up-to-date as taxation matters are subject to frequent changes.

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Summer 2005
Volume 5, Number 1

The information in Tax Perspectives is prepared for general interest only. Every effort has been made to ensure that the contents are accurate. However, professional advice should always be obtained before acting and TSG member firms cannot assume any liability for persons who act on the basis of information contained herein without professional advice.

Tax Planning — Why Bother?

By Michael Cadesky, FCA, TEP
Cadesky and Associates LLP (Toronto)

Sometimes people are reluctant to consider tax planning ideas. It is suggested that the exercise is too complicated, expensive, or risky. "The government will not like and will challenge it" is a common complaint, usually accompanied by "you can't fight City Hall."

Well, here are some statistics to consider:

  • In the U.S., since 1990, the top 50% of income earners have paid over 90% of the nation's income taxes. In 2000 and 2001 they in fact paid 96%. A sobering thought. The top 5% of income earners in 2001 paid more than 53% of all income taxes.
  • Those in the distinguished top 1% paid a hefty 32% of all personal income taxes. The Canadian statistics are similar.

Faced with carrying the nation's income tax burden, it is no small wonder that higher income taxpayers have a keen interest in tax planning!

The trend worldwide is that income tax rates are generally a little lower than they were 10 years ago. To counterbalance this, governments are becoming more aggressive about what is subject to tax and enforcement of the tax system.

We are heading into uncharted waters. Technology and globalization are threatening local jobs. Businesses cannot afford increases in payroll taxes. As the population ages, and medical advancements prolong life, the need to support our elderly will place a major burden on governments. So, what does the future have in store? Time will tell, but one thing is certain: the personal income taxes paid by the top segment of income earners will continue to fund the nation. As the nation's financial needs increase, so will the demands placed upon this group.