Welcome to Tax-mas, but it doesn’t have to be that way

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As the holiday spirit fills the air, the federal government has left a few so-called gifts under the tree, but before we unwrap them, we should ask: Are these truly presents to celebrate or merely expensive ornaments designed to dazzle while adding to our country’s burdens?

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Tax planning often takes centre stage at year-end, but our focus should be on understanding and managing taxes throughout the year, rather than just during this season of reflection, resolution and handouts.

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Let’s talk first about those gifts: the much-publicized GST/HST “holiday” means Canadians can enjoy a two-month tax reprieve on a curated list of items, and there’s also a promised cash rebate for certain people next spring.

On the surface, it sounds generous, until you realize this $6-billion handout is funded by borrowed money, with interest costs that all Canadians will shoulder. Instead of meaningful relief, it is a vote-buying gimmick wrapped in shiny paper.

Our government wasted no time patting itself on the back for these gifts. The Opposition — and most people I have talked to recently — rightly saw through them and rejected the measure outright. Yet, like clockwork, the Liberals and NDP spun this opposition into a political attack, accusing critics of indifference toward struggling Canadians. It’s an all-too-familiar script in today’s era of gotcha politics, where meaningful discourse gets drowned out by partisan noise.

This is not new, however. The Liberals — and virtually all governing parties — use our tax system to try to score political points. But this version of the government has taken it to the extreme and is becoming famous for using our tax system as a political wedge.

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For example, it introduced capital gains inclusion rate increases earlier this year and its messaging was that any political party that disagreed with such a proposal apparently did not care about lower-income Canadians, income inequality and intergenerational fairness. Again, political nonsense in this era of gotcha politics.

Turning to tax planning, at this time of year (and in February to the end of April during tax-filing time), articles, courses and other content on the topic are pumped out like clockwork. Yes, there are some interesting tidbits in some of the pieces, but such material is generally shallow overall.

Why? Because tax planning is a year-round and lifetime exercise. The average Canadian family spends more of its income on taxes, 43 per cent (including not just personal income tax, which accounts for about 32 per cent of the total taxes, but also payroll taxes, sales taxes, carbon taxes, property taxes, etc.), than on the basic necessities of life combined, 35.6 per cent, according to the Fraser Institute.

Taxes are usually the largest expenditure — or investment, if you like that term better — you will make over your lifetime.

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Does this mean the average Canadian should spend money to hire expensive advisers, such as me, to help plan their affairs better? No, it does not. Most Canadians do not need specialized tax advice. Instead, they need to become more financially literate.

In order for Canada to have long-term stability and success, we all should improve our level of financial literacy. Ideally, such training would be taught in grade school to our kids in much better depth than it is today.

As part of this, it is my dream that most Canadians will invest the time to understand why a proper functioning taxation system is important to their individual success and to the country they live in, as well as how their taxation dollars are withheld or paid and what those dollars are used for.

Unfortunately, it’s easy for the why, how and what to be tainted by simple partisan politics and by dopamine-inducing social media.

Understanding the basics of taxation, which is a critical function of becoming more financially literate, is more than just a clockwork cycle of tax-planning lists pumped out by the usual suspects. If you’re the type of person who is always searching for “great” tax-planning tips, then perhaps it’s time to do some self-reflection and realize the gotcha politics’ equivalent in tax planning is usually not all that valuable.

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Instead, like most things in life, becoming financially literate requires a true investment in time and energy to try to educate yourself on this important topic. As the old saying goes, short-term pain for long-term gain.

There are many great books and courses on tax and financial literacy. Instead of relying on year-end or tax-filing deadline articles or content, Canadians should be more proactive and seek out better content.

With a better understanding of financial literacy, Canadians will quickly realize that this country’s future success depends on forward-thinking taxation policy. It’s a cornerstone of providing the economic competitiveness that is critical to supporting good-paying jobs for Canadians and encouraging entrepreneurship.

For example, with the United States threatening significant tariffs and economic-inducing tax changes, Canada will need to think both the long term and short term in a hurry in order to compete. Costly and shallow GST/HST holidays and cash handouts are not the answer. Instead, those types of measures are simple and ugly politics that don’t provide long-term benefits to Canadians.

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This Christmas, I mean Tax-mas, let’s give ourselves the gift of knowledge. By committing to financial literacy and demanding better policies, we can ensure that Canada thrives, not just for today, but for the generations yet to come.

Let’s plant those acorns together.

Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody. 

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