In his webinar on November 2, 2021, CEO & Chairman, John Nicola, provided exclusive insight into Canada’s taxation environment, tax changes in 2022, and explained how to optimize your tax planning strategy in light of current regulations and took the time to answer viewer questions. Each week, we will publish his answers to your questions.
How do you think taxes will increase? Do you predict tax changes in 2022? Will the government introduce a wealth tax? Will the government introduce an inheritance tax like there is in the United States? And is there anything I should do today to get in front of it?
I think the tax rates can rise; I don’t think by huge amounts since we’re already nearly at the same level that the U.S has moved to, especially since we’re competing with the U.S for talent. The government can’t make the gap that wide, then expect to bring in top talent. That’s a stretch.
Looking at the wealth tax, it is a challenging tax to implement. In polls, Canadians have said that wealth taxes are great. The reality is that they don’t work anywhere else in the world, and so the likelihood is that the government will not look at that unless they can find something easy to tax. The only easy wealth to tax is real estate. The issue with going after either commercial or residential real estate is that you’re then challenging the cities and provinces that count on that tax as one of their primary sources of income. This would result in a big political fight against the Federal government.
I’m encouraged to think that the wealth tax will be talked about, but it will end up being rhetorical rather than substantive. I believe the government will see this narrative of “the one percent,” whether it’s wealth or income, as something that will need to be corrected and look to raise rates. It would not surprise me to see marginal tax rates rise, but I don’t think business tax rates are going to change. By going after the banks, they have already made their example.
Finally, inheritance tax. The U.S, in theory, has an inheritance tax but one of the things that they offset that with is the elimination of capital gains at death. So, we do effectively have an inheritance tax because that tax occurs at death right before assets are inherited. In Canada, maybe three to four trillion dollars alone are taxable as full income at death and the only exception is if you give the money away to charity. You can’t give the money to your children or grandchildren or anybody else and not pay full income tax. If somebody has a two million RRIF or IPP, then they’re looking at well over a million dollars in tax.
The reality is since we have taxes that occur upon death as their estates are transferred to the next generation, we do have already have an inheritance tax.
This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required provincial securities commissions.