A Canadian Labour Congress research report shows that, due to lavish tax breaks, the largest of Canada's non-financial corporations had paid their entire share of taxes to all levels of government in 2012 by the end of January. We call that Corporate Tax Freedom Day.
Since 2000, the general federal corporate income tax rate has been cut almost in half, from 28% to 15 per cent, and provinces have also been dropping their tax rates on corporate profits. Corporate income taxes in 2012 amounted to only 7.85 per cent of all government revenues, down from 10.1 per cent in 2000, and an average of 11 per cent in the 1960s and 70s.
The Conservative government and special interest groups claim incessantly that cutting corporate income taxes is good for the economy and for individual Canadians. We have been led to believe that tax giveaways to corporations would lead companies to reinvest in research and development as well as machinery and staff training to boost productivity. This is supposed to stimulate economic growth and create better paying and more secure jobs. But that is not what has happened in Canada during the past decade.
Let's look at the record since 2000, when the drive to slash corporate taxes began. The average annual economic growth between 2000 and 2012 was 1.14 per cent, one of the longest periods of low economic growth in decades. Business investment in research and development has fallen from 1.13 per cent of GDP in 2000 to 0.88 per cent of GDP in 2012. Investment in employee training and skills development is down by 40 per cent since the 1990s. The amount spent on training per employee in Canada in 2010 was $688; in the U.S it was $1,071. And now, taxpayers will get the privilege of subsidizing companies for employee training, with the federal government's proposed Canada Jobs Grant.
As a labour leader, I am particularly concerned about the number and quality of jobs that are being created in Canada, and the news is not good. Officially, there were 1.38 million unemployed Canadians in December 2013. That compares to 1.1 million unemployed in October 2008, just prior to the recession. Today's official unemployment rate of 7.2 per cent remains well above the pre-recession rate of 6 per cent -- but the real rate is much higher.
The jobs that have been recovered are disproportionately part-time and precarious. Part-time jobs grew at twice the rate of full-time jobs, and account for 40 per cent of the job growth between 2008 and 2013. Part-time positions make up 19 per cent of all jobs. All of the growth in part-time jobs was involuntary, where job seekers are looking for full-time work but can only find part-time hours. Over 20 per cent of all jobs are low wage, and the minimum wage hasn't kept pace with inflation in most provinces. That's a major reason why child poverty continues to be a problem in Canada. Children are poor because they have poor parents -- and one-third of all children in poverty live in households where at least one parent works full-time at a low-wage job. The ranks of the working poor in Canada are increasing, not decreasing.
Good, family-supporting jobs are the key to Canada's economic success and corporate tax cuts aren't delivering. In fact, corporate tax cuts have delivered nothing, except windfall profits that haven't benefited the ordinary Canadians who paid for them.
The years of tax giveaways have, indeed, been good for business. Their after tax profit margins rose from 6.9 per cent in 2000 to 8.1 per cent in 2012, and now we know what they have been doing with the money. Between 2000 and 2012, the total cash reserves of private, non-financial private corporations in Canada grew from $182 to $541 billion, an increase of over 300 per cent. During the same period, CEO pay went sky-high. The average CEO compensation at Canada's largest non-financial corporations averaged $7.96 million in 2012.
Corporate tax giveaways mean that the federal government has foregone billions of dollars in revenues. To pay for the tax breaks, Ottawa has borrowed billions of dollars and driven up the national debt. Now, the government has chosen to make big cuts to public services essential to Canadians in order to pay the bill for its tax giveaways.
We hold Corporate Tax Freedom Day to draw attention to the failure of business to deliver on its promises to Canadians. Clearly, slashing corporate tax rates did not produce the expected outcomes. No strings attached corporate tax cuts are a cruel and very expensive hoax and we should demand our money back.
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This new credit was a budget measure that was designed to address criticism that the earlier Children's Fitness Tax Credit (which is still in effect) unfairly left out parents who paid for programs where the kids had to do more thinking than sweating. It provides a 15 per cent non-refundable federal tax credit on the first $500 spent on your kids' artistic, musical, recreational or cultural development in 2011. That means the tax credit is worth a maximum of $75 per child. Parents of disabled children can claim a 15 per cent tax credit on the first $1,000 of eligible spending, or a maximum of $150. To get the credit, children must be under 16 at the start of the year in which the program is taken (under 18 in the case of disabled children). To qualify, a program must be at least eight consecutive weeks in length, or, in the case of children's camps, at least five consecutive days. Receipts are a must.
If you performed at least 200 hours of service as a volunteer firefighter in 2011, you can see your tax bill reduced by up to $450 - another new non-refundable tax credit introduced in last year's federal budget. That's the net effect of a 15 per cent tax credit on the $3,000 volunteer firefighters' amount. The 200 hours doesn't have to be entirely spent fighting fires. Attending required meetings and training also qualify. Be aware that there's a big wrinkle in this tax credit for those who get an honorarium for their volunteer efforts. Currently, the first $1,000 of that honorarium is exempt from tax. But if you claim that income exemption, you won't be eligible for the volunteer firefighter's tax credit. No documents need to be filed, but the CRA says it may require claimants to provide certified proof that they actually do qualify.
This measure doesn't actually take effect until the 2012 tax year, so you won't benefit from it when filing this year. But people who will eventually benefit can file a new TD1 Personal Tax Credits Return with their employers now to reduce their withholding tax for the remainder of 2012. This credit amounts to an increase of $2,000 in the claim when a taxpayer's dependent is physically or mentally infirm. So the spouse, common-law partner or other eligible dependent claim becomes $12,780 instead of $10,780. Similarly, the claim for a disabled child becomes $4,191 rather than $2,191. The caregiver amount claim for looking after an infirm relative also goes up by $2,000.
Tax-free savings accounts were first unveiled in the 2008 federal budget and have continued to grow in popularity - in part because Canadians can put more money into them each year. If you haven't yet contributed to a "Tiff-sa," the available contribution room rose by $5,000 on Jan. 1, 2012 and now stands at $20,000. TFSA contributions can go into GICs, mutual funds, bonds, stocks or savings accounts and earn profit tax-free, but keep in mind they don't work like a bank account with a maximum balance. When you withdraw funds in one year, TFSA rules don't let you redeposit that amount until the next. In 2009, about 70,000 people withdrew money from one of their TFSA accounts and then redeposited it the same year, so the Canada Revenue Agency levied penalties of one per cent per month on redeposits that were classed as excess contributions. The government eventually relented because of the widespread confusion, and rescinded the penalties in 2010 for people who accidentally put too much into their accounts during the TFSA's debut year. The amnesty is over now, however, and savers can't expect that kind of pity from the tax collector anymore. If you want to move your money from one account or institution to another within the same calendar year, you have to use a formal transfer process that requires filling out forms and, with most banks, paying a fee.
As of the 2011 tax year, examination fees now qualify for the tuition tax credit. That is, as long as the total fees, including exam fees, amount to at least $100 and the exam is required to obtain professional status or to be licensed or certified in a profession or trade. For students enrolled full-time in a university outside Canada, the minimum length of course that qualifies for tuition, education and textbook tax credits has been lowered from 13 weeks to three weeks. The 2011 budget also loosened the restrictions on transferring investments held in one sibling's Registered Education Savings Plans (RESP) to another sibling's RESP. Under the old rules, transferring RESP investments property from one sibling's plan to another's could trigger a repayment of the Canada Education Savings Grant unless the sibling receiving the transferred investment is under the age of 21. But transfers occurring in 2011 and after will not trigger grant repayments as long as the receiving RESP was set up before the beneficiary turned 21.
As of 2011, the maximum medical expense claim of $10,000 for a dependant relative (other than for a spouse, common-law partner or a minor child) has been eliminated. Now, there's no limit. The last budget also made a change to the rules governing Registered Disability Savings Plans (RDSPs). Under the old rules, all grants and bonds paid into the plans in the previous 10 years had to be returned to Ottawa if a disability assistance payment was made to an RDSP beneficiary. Now, no repayment is necessary if a doctor certifies that a plan recipient isn't likely to survive for five years
Most tax brackets and credit amounts were raised in 2011 to account for inflation. In the case of federal tax brackets, they have been raised by 1.4 per cent from 2010's levels. Most of the basic personal amount claims have also been boosted by 1.4 per cent. The 2011 TD 1 tax forms and all of the software and online tax programs reflect the new amounts. Similarly, the thresholds at which some benefits begin to get clawed back (like Old Age Security payments) have been raised by 1.4 per cent. Some refundable tax credits, like the Canada Child Tax Benefit, have also been boosted by 1.4 per cent. Many provinces and territories have also boosted their personal tax credits by indexing factors ranging from 0.8 per cent to 2.0 per cent. But two provinces - Nova Scotia and Prince Edward Island - made no changes in their personal tax credit amounts.
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