Audit, Accounting & Taxation in Canada
Odoi Yemoh is the Founder and Executive Director of Reality Capital Management. Established in 2009 and based in Toronto, Canada, the firm offers tax preparation and planning, accounting, payroll, unemployment consulting, personal household budgeting, loan analysis, product management and marketing, as well as QuickBooks training and support.
What would you say are the advantages and challenges of providing effective tax advice in Canada? In your opinion, how complex is the tax system in the country?
Providing effective tax advice in Canada is done through tax planning, which helps Canadians with reducing their income tax burdens through pension income splitting, RRSPs, Registered Disability Savings Plan (RDSP), Open Tax Free Savings Accounts (TFSA) and many more. There are also other benefits for employers, however, the generally expenses incurred by an employee are not deductible and there are certain specific exceptions. However, depending on the employee’s relationship with their employer, there may be unforeseen tax problems too, such as purchase employment assets, the benefit of using company car, loans from your employer, etc.
Canadian business owners find the tax system unfair because:
- Most new businesses have losses in their first few years after incorporation. However, the losses will be retained by the corporation and can be used against future corporate income.
- Corporate owners may have personal assets in the corporation or may be using money from the corporation for personal purposes, which may include unintended tax issues.
- Some owners tend to take out assets from the corporation, which then triggers personal tax consequences.
- Investments held inside the corporation are subject to tax rates, which typically are higher than the top personal tax rates
- Corporate income is taxed and the income flowed out by dividends is taxed too. While there is a measure of integration to reduce double taxation, some double taxation on dividends is still evident.
The Canadian Government has been imposing strict rules and regulations, which are preventing individuals and business owners from making profits. Individuals gain more from tax saving due to the benefit given to them. This makes it difficult for business owners to create jobs for the young people or strategize their business, because they are taxed based on their revenue and they’d rather lose in tax saving.
In what ways has the Canadian tax system transformed throughout the last 2-3 years?
Each year, the Canadian tax system becomes more complicated. The personal income tax was extended to most of the working population at high, progressive rates, and the corporation income tax was raised drastically and applied to excess wartime profits. Through the tax rental agreements, income tax jurisdiction was transferred from the provinces to the Federal Government. The point was to make income taxation the principal source of federal government revenue for financing Canada’s war effort and to lay the basis for financing the post-war welfare state. For a few years, the Federal Government has been mandating to make amends on the tax system for small business owners and this makes us think that there is a legitimate issue in trying to create tax fairness for all Canadian people. The Government has been trying to improve the fairness of Canada's tax system by closing tax loopholes and amending existing rules to ensure that the rich pay their fair share of taxes and that people in similar circumstances pay similar tax.
As the Executive Director at Reality Capital, how are you developing new strategies and ways to help your clients?
Reality Capital Management helps clients with accounting, taxation, auditing and financial services with the oversight of experienced accountants. We offer defining the profitability of companies through our financial education courses. Our clients are usually individuals and small businesses including Non-profit organizations in Greater Toronto Area (GTA) and outside of Ontario. Currently, Reality Capital Managements expanded on budgeting and debt consulting courses to the public, allowing students to make valuable financial management decisions. Developing these strategies helps us to serve our current and future clients better.
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