Richest Canadians Pay More Tax Under Trudeau
The impact of this policy, however, seems to have come at the same time as some of the highest paid Canadians have tried to avoid paying too much tax.
The Liberals came to power in 2015 by promising a “middle-class tax cut,” which they planned to fund by raising taxes for the wealthiest Canadians. Starting in 2016, they lowered the average income tax rate and raised taxes for Canadians earning more than $200,000 a year.
With the many economic factors to consider, the exact effects of the policy are hard to isolate, especially considering the fact that many senior employees have transferred some income to the 2015 tax year to pay less taxes.
On Thursday, the Ministry of Finance unveiled data for 2017, showing that the portion of personal tax paid by the highest-paid people that year was 25.1%. This is an increase of 0.9% from 24.2% in 2014 – the last full year before liberal measures were implemented.
The plan was unveiled at the end of 2015, but did not take effect until early 2016, giving the best paid time to protect their income. For this reason, it was necessary to consider the figures of 2014 and 2017 to have a good comparison.
The richest have adapted
In a separate report released on Thursday, the Office of the Parliamentary Budget Officer highlighted the revenue transfers that took place at the end of 2015, and the impact of these on the 2015 and 2016 figures.
According to the report, many of the wealthiest Canadians transferred some income in 2015. Thus, in 2015, government revenues increased by $ 5.6 billion, but a year later, they decreased by $ 3.2 billion.
In an interview, Parliamentary Budget Officer Yves Giroux said that income transfers had been larger than expected.
“People with higher incomes can adjust their behavior and tailor their tax planning strategies to changing tax systems,” he said.
Other factors, however, may influence the numbers, including natural growth in the economy, inflation and demographic changes.
Jack Mintz, a tax policy specialist at the University of Calgary, believes that the government’s changes have not generated much revenue, in light of other factors.
“When we look at the total increase in personal income tax revenues in 2017 compared to 2014, taking into account normal growth in the economy and inflation, it seems to me that they have not a lot of money from this rate hike, “he said.
According to Ministry of Finance figures, 362,000 people – or 1.3% of all Canadians who filed a tax return – earned enough income to be in the highest tax bracket. In 2016, they were 326,000, compared to 356,000 in 2015.