PAGE 2, THE MONEY SUPPLEMENT

Canadians’ tax bite

Canadians’ direct and indirect tax
bills arc ‘continuing. their upward

_ spiral, according to the Fraser In-

stitute, an independent rescarch

. ‘group. 7

-The Instituté calculated the
average Canadian family’s gross in-
come for:1988 would be $39,500,
of which more than half — $20,697
or 52.4 percent — would be needed

*. to pay income taxes, sales taxes, ex-
_ cise and property taxes. and deduc-

tions for pension programs.
Surprisingly perhaps, the Fraser

yas bigger in ‘88 |

group said Albertans’tax loadisthe |

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highest in Canada at 60:8. per cent
despite the fact Alberta has noretail
gales tax, 0882 0 Py

* Quebec's taxes ranked second at .
'§2.9 per cent and Ontario's third at -

51.4 per cent. Other provinces”

rates were: 50.6 per cent in British |

Columbia; 50,5 per cent in Sas-
katchewan; 47.9 per cent, in

Manitoba; 43.9 pér cent in New
Brunswick; 41.9 per cent in Nova |

Scotia: 39 per cent in New-

foundland: and 36 per centin Prince

Edward Island. oe

to promising candidates for

Banque fédérale .

- Canadi

:850,000 -

e Effects of Personal Income Tax Reform

a Thousands of households - ORE

é

0-15. 15-30

Income ($000)

30-50 50-100

Tax reform’s

The initial impact of the first
phase of tax reform was reasonably
painless for most Canadians when
it took effect, appropriately, on

Canada Day, July 1. Many -tax-

payers found their tax bill some-
what reduced on that date and there
were few tears on that account,

The number of tax brackets was
reduced from 10 to three (or effec-

tively four in Ontario). with basic.
federal rates of .17 per cent on tax-

_able income under $27,500, 26 per .
-T cent on the next $27,501.10 $55,000

and 29 per cent on $55,001 and up.

In conjunction with the conver-
sion of some exemptions to tax
“credits”, the government forecast
a reduction in revenue of $11 bil-

lion over five years when the
measures were tabled in June, .

1987. |

home free:

At that time,:Finance Minister

‘Michael Wilson said replacing ex:

——

"isting federal sales tax of 12 per.
“ent on many manufactured goods -

‘Here’s why everyone _

emplions and deductions with

credits would mean $850,000 tax-

payers, including 250,000 senior
citizens, would be dropped from the

_income tax rolls entirely, helping
- Wilson’s objective: “to target assis-
tance more effectively to those with

lower iricomes and reduce the after-

tax value of transfer payments to ,

those with higher incomes.”

Phasetwoo
foCOMe cus
‘Now, of course, “Canadians: are”

_ waiting for the second shoe to drop.
That’s the: potentially ominoys::
x Ti an ag 20 percent

Phase Two of-tax reform, seen as
the essential counterbalance..to
Phase One and involving some kind

of national sales tax at the. retail

level. . :
Very little definite information is

available and no draft legislation or
~~ discussion paper has appeared. But.
-essentially the plan is believed to
entail a Canadian form-of the Valuc
Added Tax commonly employed in

Europe.

. It would involve replacing the ex-

which-many Canadians don’t even

realize they’re paying. because it’s ..
levied at the manufacturer levels. Dot ..

Son «Now, however, back in power
* witha majority, the government is

Fundamentally

| ga tlawed . oo,
S | 0 U av eC a V a | | Wi | ‘Wilson didn’t mince words about
7 | ; Am ™ the existing 1ax in his 1987 state-

‘gf us are likely to put off. But
~ neglecting to make your will is
potentially serious for your family

_It’s one of those things too many

and others you want to remember.

In fact, it’s easy to preparc your -
will and once it’s signed and put

away ina safely deposit box; you'll
have the satisfaction of knowing

~~ you’ve done the right thing, And

—

i
{

* 4 guarantee it will be someone of

you'll be sure your family will be

sparcd the kind of hassles thal can
develop when someone dics intes-
late. DO

If there is no will at death, the Sur-
rogate Court in your province will
appoint an executor and there is no

whom you would have approved. In

: any event, the disiribution of your
~ estate is then entirely at the discre-

tion of the executor —~ according to
the law, but not necessart

ly accord- .

ing to your wishes, because there

was no legal record of what you’

wanted. . |

If you’ve been dragging your
heels in the will department, it
makes good sens¢- to remedy the
problem as soon as possible. Al-
most always, you should ask your
lawyer to help, for alttiough do-it-
yourself wills arc legal in most parts
of Canada, thicy can lead to
problems your beneficiarics really
don't need. ot
.Do your
homework = = te

Beforc you go to the lawyer's of-
fice, it's a good idea 0 do sore

homework. That means assembling | |

details of all your asscts, plus loca-
‘tions and numbers of all insurance

information and any support arran-

gemenis outstanding for ex-

spouses and children from previous :

ment, calling it, “fyndamentally _

- flawed and hidden, arbitrary and

" marriages. Most trust companics
provide helpful booklets to show’
- you what’s needed.

You should also give some
thought to whom you wish lo name

as your executor — the person who

makes sure your intentions are Ccar-
ied outafter death.
Then, cquipped with all the infor-

mation necded, your lawyer will be .

able to draw up the actual will, list-

_ing your bequests and specifying
_the disposition of yourestale.

capricious.” He said it “hurts our

Chances are your tax breaks asa
result of charitable donations will
increase marginally under tax

reform —at least if your taxable in-

come is less than $55,000.
But it’s likely to be a bit more

. complicated because from now on.
you get “credits” instead of deduc- .
tions, The credits are 17 per conton
the first-$250 you give and 29 per.

-cent on additional amounts.

Other rules are unchanged. So
credits are still limited to a maxi-

mum of 20 per cent of your net in- ..
come for the year; carry-forwards

of unused amounis are permitted for

five years; and special rules for.

As calculated when the first phase of tax reform was announced in 1987, this Department of Finatice:
chart shows numbers expected to pay more and less personal income taxes, respectively, for 1988." = :

economy. It puts more tax on

Canadian-produced goods than it.
does on competing imported goods. |

It puts a hidden tax on our exports

that makes them less competitive .
_{and) docsn’t make much sense ina
_ country, that trades as much as we -

do.”

“However it evolves, the new na- -
tional.sales. tax apparently would —

apply at the retail level to every-

- thing’ we. buy, except food, and to
» GVEFY, SEFVICE WE USC, including -
“guch items as haircuts and

‘drycleaning.

ormore:.4, °°

‘ i tT

“ It's: also eported that. unless ;
there’s some kind of a deal with the .
. provinces, the new tax would bein

addition \o existing provincial sales

taxes and could run total sales tax
Yevies to 20 per cent or more in
“some provinces. —

Clearly, it’s highly sensitive

politically. One politician on the

© government side might have let the
‘cat out of the bag during the elec-

tion campaign in guessing out loud
-that the tax would produce an extra
$10 billion revenue. This was

vigorously denied and no more was -

heard. —

said to be moving rapidly with sales
tax plans —— as indeed it will have
to do if less revenue is forthcoming
as.a result of Phase One and if the

mammoth deficit problem is-to be

addressed.

Donations still mean
tax relief in reformera

donations of cultural property, gifts

to the Crown and gifts of properly,
as opposed to cash are all as they

were in pre-reformed days.

“As before, in most cases it’s still

best for one spouse to claim all

_donations-made by both partners.
There are exceptions, however, and
you'll want tocheck these out if you

and your partner have donated fair-

ly large amounts -to charity in the

year.
Also make certain your credits

stead, plan to carry any balance for-

ward to benefit in a future tax year.

. 100+) at |

don’t exceed your total tax liability
‘because they're not refundable, In.

FPA ae nee te end OO