Chris Snowden CA

If the federal government wants to cut taxes, it can do so in a major way without cutting back services. How? By putting tax simplification on the front burner. With 52,499 employees, the Canada Revenue Agency is the largest federal department or agency. Its employment is up by a hefty 31 per cent this past decade. In 2023-24, CRA spent almost $6.3 billion on operations, capital expenses and pension benefits to collect $332 billion in revenues and distribute $11 billion in rebate cheques. Administrative costs that are less than two per cent of revenues seem reasonable. On the other hand, salaries, benefits and other operating costs average $120,000 per employee, which is not peanuts. Compliance costs for taxpayers are even more onerous. Based on World Bank estimates of the cost of doing business, the average business takes 131 hours per year to comply with federal and provincial taxes, with total compliance costs ranging between $15 billion and $21 billion in 2024. That would be equivalent to raising the corporate income tax rate by three to four percentage points from 26 per cent today. Tax complexity not only costs money, it makes government policy less effective. An Austrian paper published this April found that when tax structures are complex and uncertain, corporate tax policies have less impact in encouraging investment and hiring, especially by domestic companies. Thresholds are a common way to reduce both compliance and administrative costs. For example, small traders earning less than $30,000 annually (or US$24,000) from the sale of goods and services do not need to register to collect GST/HST on their supplies. This threshold has not changed since 1991 when the GST was introduced so its real value is now half what it was then. Most countries with value-added taxes (VATs) have similar small-trader thresholds though many are substantially higher than ours: Australia (US$52,817), France (US$131,286), Japan (US$102,459), Switzerland (US$95,238) and the U.K. (US$125,000). Of course, thresholds introduce unfairness and distortions as smaller companies are tax-advantaged and may also hold back production to stay below a threshold. But there’s a trade-off: an exemption for smaller taxpayers enables governments to reduce administrative costs for the public sector and compliance costs for the private sector. In a 2004 paper, former IMF tax economist Michael Keen and I found that a much higher threshold for small traders, more like that in Japan or the U.K., would strike a better balance. It would also help slim down the CRA. Thresholds exempting small businesses from reporting requirements should also be restored, indexed and maybe even increased. If the federal Liberals want to cut public spending, they should put some focus on tax simplification. Tax complexity is an economic growth killer that we could reverse if we put our minds to it.

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Lifetime Capital Gains Exemption: Update from CRA Practitioners have told us that the Canada Revenue Agency (CRA) has been incorrectly assessing 2024 T1 returns where the Lifetime Capital Gains Exemption (LCGE) was claimed. We learned from the CRA that two errors had been corrected and that reassessments were scheduled to begin on June 10. However, practitioners have since reported that the CRA has not yet reassessed any of their affected clients. Today, the CRA informed us that there has been a delay, and reassessments are now expected to begin shortly: "There has been a delay in timelines previously communicated, but we expect to begin reassessing impacted returns shortly. This remains a high priority for the Agency."

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The Canada–U.S. trade landscape continues to evolve, bringing both complexity and opportunity for Canadian businesses. In our recent webcast, KPMG leaders from tax, legal, and advisory shared timely updates on the latest trade developments and offered actionable strategies to help organizations navigate tariff changes with confidence. ⏯️ Watch the replay now to gain the critical insights to refine your trade strategy and stay ahead: https://lnkd.in/g2NhXPaf

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TRANSACTION NEWS: A joint venture between Scannell Properties and Manulife Investment Management has sold LifeScience Logistics at Durham 85, a 250,541-square-foot, class A logistics facility in Durham, N.C. The property was sold to EastGroup Properties Inc. https://lnkd.in/gc39rbHx

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