May 182014
 

I recently read an article written by the affable David Carrigg, a prolific Canadian columnist 🙂 The article is about how a public insurance company (ICBC) made a botch of things and overcharged its customers by $39 million! Furthermore ICBC not only overcharged some of its clients, but it also undercharged other customers to the tune of $71 million total. Many B.C. residents became upset. When a Crown corporation mismanages money tax payers may be on the hook. And governments will often feel the pressure to raise taxes on the public to maintain fiscal order.

During this past year the Feds raised EI premiums. Quebec raised personal income taxes. B.C. increased its health care (MSP) premiums. Manitoba raised its provincial sales tax from 7% to 8%. And many Canadian cities like Toronto, Edmonton, and Vancouver (where I live) have raised local taxes 🙁 According to the Fraser Institute, a public policy think thank, the average family earned $97,254 in 2013 and paid $42,400 in total taxes. In other words, 44% of what the average Canadian family makes is spent on various taxes. 14-05-tax-dollar-goes-Summary

Many people go out of their way to find discounts on stuff they want to buy. They shop wholesale to save on bulk items. They feel disappointed when they miss a sale on their favourite toothpaste. Yet they don’t even think twice about paying the full retail price for their taxes 😐 They can try to outperform the stock markets. They can cut coupons everyday. They can even work extra long hours for overtime pay. But they could probably save more money than all those strategies combined by simply lowering their total tax rate by ten percentage points or so.

This is why I operate my rental farm as a business instead of a personal property, invest inside tax sheltered accounts, and have debts with deductible interest so the more taxes I pay, the more I get back. It’s all for the purpose of saving taxes. Each year I calculate how much tax I pay as a percentage of my total income. I track this ratio and try to reduce it every year 🙂 Like any other personal finance metric, once we start to track something regularly it will start to become something real to us that we can monitor, so that we can then set appropriate goals for it. But if we don’t track it, then we won’t know where to start or how low we should aim for. Last year my total taxes (income tax, sales tax, payroll tax, property tax, etc) represented about 30% of my total income. So I’m fourteen percentage points lower than average, but I think I can do better 😀 Who says doing taxes can’t be fun? 😉

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Random Useless Fact: 

14-05-interracial-photo-couple

 

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Investing Pursuits
05/18/2014 6:52 am

Taxes are the biggest expense you will pay. As Rich Dad Advisor, Tom Wheelwright, always says “Quickest way to increase your wealth is to reduce your taxes.” . Using debt to purchase assets that pay you is a good example. A good example is a rental property.

http://www.youtube.com/watch?v=d_Y09DUDWDk This is a video on 4 benefits of Rental Property. This is American, but everything except the 1030 exchange should apply. A 1030 exchange is where an investor can sell a property and then within a certain time, if they buy a bigger property they do not have to pay capital gains.

Venetia Rose
07/16/2014 11:05 pm

Very true, taxes are the biggest expenses you will pay and the best way to increase your wealth is to reduce your taxes With a consultation of a good Canadian tax adviser,you will be able to track your taxes better. Go to http://www.kpmg.com/Ca/en/services/Tax/Pages/Tax-Rates.aspx for more details.

save. spend. splurge.
05/18/2014 9:00 am

Yep. Exactly why I am a small business owner who takes dividends.

http://asset-grinder.blogspot.ca/
05/18/2014 11:20 am

Wish we had more options for auto insurance than ICBC !!!! Grrr I hate them!!!!

Clarisse @ Make Money Your Way
05/18/2014 3:51 pm

When my husband calculated his tax we discovered it how big his tax deduction every month! That’s why it’s very unfair if you know someone that didn’t pay their taxes. Last month, our government had lunch a Tax Payment Program that encourages the individuals to file and pay their taxes they even offered free foods and entertainment to avoid the people getting bored.

David
David
05/19/2014 5:04 am

Most reputable studies on tax compliance have shown that when the rates are lower (or perceived to be lower), the government actually collects more taxes (presumably due to increased compliance). Also, as the perceived value of Gov’t services goes up (and waste of $ goes down….ya right!), the same is true.

I seriously doubt that cheesy “pay your taxes” luncheons or society’s “be a good citizen and pay your taxes” message have much effect on overall tax compliance.

David
David
05/19/2014 4:57 am

I’m curious how you track your sales tax? Do you collect and input all your purchase receipts or just make an assumption based on your annual spending?

The Government (at least in Ontario) is famous at disguising taxes and calling them things like premiums, levys, user fees and the like. I even consider things like passport fees, license fees, road tolls, etc. to be an additional tax.

One strategy that I use to save on tax is paying cash for services. There seems to be a misconception that finding trades and other service providers through Craigslist (or equivalent) leads to low-quality service. However, there are many licensed or equally qualified service providers who have the same thoughts about their already-too-high taxes. Some examples include: cleaning ladies, handymen, auto mechanics, landscapers, movers, plumbers, etc.

Linda A Perez
06/17/2014 12:17 am

Thanks for the information about tax tracking.This article helps you to become aware on where your taxes are going. Consult a good Canadian tax adviser and solve and pay your taxes on time.

TheTrachean
TheTrachean
06/23/2014 5:50 am

This is about the “random useless fact.” Could be true sometimes, though. But I guess some photo editors would know what to do. Otherwise, it would be as funny as these pictures here.