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January 27, 2022

Billions lost through tax loopholes and preferences: Report

In spite of the extensive free advertising the program received from suppliers like Home Depot and Rona, it seems relatively few Canadians took advantage of the much hyped Home Renovation Tax Credit on their tax returns last year. 

In a report outlining the billions of dollars Ottawa gives up in targeted tax credits, Department of Finance officials admitted that only three-quarters of the $3-billion set aside for the high-profile program ever got paid out.

Is it time to forget these types of tax credits altogether? Definitely, says Toby Sanger, senior economist with the Canadian Union of Public Employees

Sanger suggests that tax credits such as this actually fill the tax system with holes and make tax filing more complicated and inequitable.

“A number of the most expensive tax preferences and loopholes are also highly regressive and – I would argue – damaging for the economy,” Sanger argues.

Sanger believes that the most “egregious” of these is the employee stock option deduction, a $590-million expense that allows employees receiving company stock options to pay tax at half the rate that would apply if the benefit were in salary. This loophole allows Canada’s top and executives to save millions in taxes.

Another regressive and expensive tax measure of very dubious economic benefit is the tax preference that allows capital gains from investment income to be taxed at half the normal rate, he adds – given that half the value of this loophole goes to the top 1 per cent of highest income taxfilers.  

These measures were supposedly introduced to spur real investment and economic growth, but there isn’t much evidence that they’ve actually achieved that, Sanger maintains.

Instead, they have likely helped fuel the asset booms and mergers and acquisitions that are destabilizing our economy — as well as serving to increase income inequality, Sanger says.

Where do yiu stand? Socialist claptrap or an accurate indictment of what's wrong with our tax system?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...