October 16, 2021

Mexico proposes a 'soda tax' to combat obesity

Mexico is the latest country to propose a higher tax on soft drinks in an attempt to curb high obesity rates which is a growing worldwide problem.

The country's residents are the most obese adults in the world with 32.8 per cent of Mexicans deemed overweight, compared to 31.8 per cent of Americans, according to the UN Food and Agriculture Organisation.

Mexican President Enrique Pena Nieto hopes to raise $950 million for the country thanks to a proposed eight-cent (1 peso) per litre tax on soft drinks. Mexico's residents drink an astonishing 163 litres of soft drinks a year, one of the highest consumption rates in the world.

Overweight and obesity rates have risen around the globe with the likelihood of adults having one of these conditions rising to 34 per cent in 2008 from 24 per cent in 1980. Rates are increasing in every country, even in low-income countries where there's severe malnutrition, says the United Nations FAO.

Obesity isn't good for anyone's health, but it also puts a strain on a household's budget - whether it's through healthcare expenses or increased food costs. Weight increases can lead to type 2 diabetes, heart disease or cancer, as a few of the issues, which lead to a heavier strain on the country's healthcare system.

Countries have attempted to use a "fat tax" to improve the eating habits of residents. It's taking a page out of the book of tobacco control, which research shows that once cigarette prices rose by 50 per cent, smoking rates dropped.

Denmark is believed to be the first country to implement a "fat tax" in October 2011. The tax was added to food with more than 2.3 per cent of saturated fat, which included dairy, meat and processed foods. While the tax meant well, it was cancelled after about a year since it had a harmful effect on businesses and led Danish residents to cross the border to buy their junk food. The tax did manage to raise a revenue of $216 million, according to the New York Times.

In France, there was a backlash over a proposed "Nutella tax," which could have quadrupled the cost of food containing palm oil, such as Nutella. It was voted down.

Samoa Air, an airline company servicing the South Pacific, introduced the first-ever, pay-by-weight policy, which charges for a persons' baggage, along with their weight.

Unfortunately, obesity rates in Canada have climbed to record rates. The Ontario Medical Association has called for junk food taxes on unhealthy foods and cheaper taxes on healthy food option as some of the organization's recommendations.

Organizations continue to debate whether it's more or less expensive to eat healthy. While fruits and vegetables cost less compared to other high fat or high sugary foods, it depends on how you measure the price, according to a study released by the U.S. Department of Agriculture. Foods compared by price per calorie show that high-calorie processed foods are cheaper, while if food is compared by weight or portion size than healthier grain, fruit and vegetable and dairy options are more inexpensive.

Do you think a "fat tax" is a good or bad idea?

Josephine Lim, MSN Money

October 15, 2021

The CRA will tax money raised through crowdfunding

Crowdfunding has become a legitimate avenue for entrepreneurs and artists to raise money for their unique ideas or projects, but anyone crowdfunding needs to know that the CRA can tax you on the money raised.

If a person received money for their business or project, such as a movie, and they receive the completed product or a promotional item, but not equity or a cut of the profits, then that's considered to be business income. But whether those crowdfunding expenses are deductible or not depends on whether they follow the Income Tax Act.

There continues to be debate in Canada about the pros and cons of crowdfunding, but the latest statistics by research firm Massolution show that $2.7 billion was raised worldwide for more than one million campaigns in 2012.

Meanwhile, both the Ontario and Saskatchewan governments are looking into equity crowdfunding, which would let startups and small businesses attract potential investors through crowdfunding.

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October 09, 2021

Cheap flavoured tobacco is turning out to be a big money maker

An explosion of cheap, flavoured cigars in recent years has delivered a nice boost to cigar sales in North America and may be changing the demographics of cigar smoking.

Despite a four-year-old ban on flavoured cigarettes, more than half of Canadian high school students admit they’ve tried smoking some sort of flavoured tobacco within the past month, according to a new study.

Fruit- and candy-flavoured tobacco packaged in bright colours aimed at children-- flavours available include chocolate, mint, cherry, peach, and strawberry -- makes it easier for youth to become addicted to tobacco, warns Rob Cunningham, a senior policy analyst with the Canadian Cancer Society.

Cheap, flavoured, small cigars are marketed aggressively to young people and have resulted in high school kids being twice as likely as their older counterparts to pick up the habit, according to some estimates.

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October 03, 2021

Federal government may move ahead with fitness tax credit for adults

Forget all those chunky kids, the federal government is moving towards paying adults to get off the couch and into the gym.

After months of preparation, the Parliamentary Budget Office has finally come up with an estimate of what would likely cost to create the adult fitness tax credit it promised in its election campaign. The credit would be similar to the children’s fitness tax credit the government introduced a few years ago. 

If adopted, the rule change would allow taxpayers “to claim a non-refundable tax credit of up to $500 in eligible physical activity programming costs against their taxable income each year at a rate of 15% (i.e. the maximum annual amount to be offset against an individual’s taxes payable would be $75),” the PBO estimates.

The credit wouldn’t be transferable, so only those actually burning calories would be able to claim it.

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September 10, 2021

Accidentally forgetting to include income with your taxes means big penalties

Most people know that if they're late with their taxes, they'll be assessed a penalty – five per cent of the amount owing, along with one per cent a month in interest. Fair enough, you're supposed to settle up on time.

Every fall, however, tens of thousands of Canadians get stung by something they may not have known even existed – the "repeated failure to report income" penalty.

Failing to report two T-slips in a four-year period – one in the most recent tax year and one more in the previous three tax years – is enough to get you in real trouble, warns says Mark Goodfield, a tax partner at Cunningham LLP in Toronto and the man behind The Blunt Bean Counter blog.

And the tax authorities do like to balance the books. Each year, the CRA checks the T-slip information in its database against taxpayer’s tax returns to ensure the T-slip income reported matches up.

When it doesn't, you can expect a reassessment demanding payment of the tax due. If it's your first offence, you're on the hook the actual income tax owing and possibly some interest. However, if it's the second occurrence in the last four years, CRA will hit you with a 20 per cent penalty of the unreported income.

Yep, that's right. You'll get dinged on the income not reported, not on the tax underpaid.

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September 09, 2021

Germans resort to avoiding taxes by hiding cash in diapers

With the world banging on Switzerland's door to open up about its bank secrecy, Germans who stashed their cash in the tax haven are turning to creative ways to hide their unreported money.

“You regularly have instances of people wearing a secret money belt or concealing it in their underwear,” a customs spokesperson told Bloomberg.

It must have been a tight fit for a 72-year-old man to wear a women's corset packed with 150,000 euros. While another man hid 140,000 euros in adult diapers, officials have also found cash hidden in a shoe, a car battery and in a gingerbread house.

Last year, customs between the German-Swiss border discovered 20 million euros of undeclared cash (and that doesn't mean they found it all either). With German residents accounting for 5.2 million overnight stays in 2011, the largest nationality of foreign visitors the Switzerland, they have easy access to Swiss accounts.

Anyone bringing over more than $10,000 euros ($13,200 USD) and not declaring the amount is breaking the law. 

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July 24, 2021

Could a Canadian city go the way of Detroit?

The recent bankruptcy filing in Detroit is raising red flags about other major U.S. cities also cracking under the weight of dealing with billions in retiree benefits and unpaid loans.

Could the same thing happen here?

Canada's municipalities may be unlikely to face the same fate, but the financial fall of Motor City carries lessons for towns and cities in this country as well, suggest some urban planners.

"Detroit is a wake-up call to say that long-term problems can eventually get to you if they're allowed to remain long term," policy consultant Brian Kelcey told CBC News.

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June 10, 2021

Federal government moves to eliminate value of testamentary trusts

Starting in 2016, the federal government wants to effectively abolish testamentary trusts, a common estate planning technique that allows Canadians to reduce tax on the investment income earned from their assets, by their beneficiaries, after their death.

This type of arrangement allows one person, typically known as the estate trustee, to hold and manages the deceased's property for the benefit of someone else, known as the beneficiary, explains Jamie Golombek, who runs CIBC's estate planning unit.

Right now, testamentary trusts and estates pay federal tax at graduated tax rates starting at 15% federally for income under $43,561 (in 2013) and ultimately rising to 29% once income reaches about $135,000. Each province then takes its own proportional cut.

But it's still a great deal, since trusts are not that dificult to establish and are used extensively by advisors.

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May 03, 2021

Why getting a tax refund is a poor idea

Getting a large tax refund each year simply means you’ve remitted too much tax to the Canada Revenue Agency throughout the year, essentially giving the government an interest-free loan.

That’s a bad idea, says Tim Cestnick, author of 101 Tax Secrets for Canadians.

While many employees understand that there’s a cost to overpaying taxes throughout the year, the idea of receiving a refund can be appealing since many view it as forced savings or found money. But it’s still a mistake, Cestnick maintains.

And getting it upfront from a tax discounter, by cheque or loaded onto a debit card, is likely worse. That's because it comes with a catch — a fee that can be as high as 15 per cent of the refund in certain cases — which, when you think of it, is a rather dim way to access your own money.

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April 29, 2021

More last-minute tax questions answered

Cleo Hamel.HR BlockCleo Hamel, senior tax analyst with H&R Block, answered many of the MSN audience's pressing tax questions last Friday on our live tax chat. Unfortunately, she was only able to get to a portion of the questions that were asked. Cleo has graciously answered many more questions, which we are posting below.

Questions are grouped by category and the categories are in alphabetical order. Enjoy!

Charitable contributions

  1. Question: Is it a good idea to make a charitable contribution each year? How much do you get back?
    : Charitable donations can provide a significant tax savings. You get a 15 per cent credit  on the first $200 and a credit of 29 per cent on every dollar over $200. To maximize this credit you should pool the household receipts and one person will claim the entire amount. Or you can hold on to your receipts for five years and claim them all at once.

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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...