 If you follow virtually any Canadian news source you have likely heard about the Chinese telecommunications company Huawei.
Recently I was asked why there was so much media reporting about Huawei. The answer is not a simple one. Huawei is a world leading technology company that among other activities produces hardware such as servers and other technologies that enable 5G wireless networks. 5G networks enable autonomous vehicles and other automated machinery to operate and is widely considered to be essential for the emerging new digital economy. Although Huawei is not the only company that manufactures 5G devices, it is the most controversial. Currently many of Canada’s allies including the United States, Australia, New Zealand and Japan have all banned Huawei citing security concerns. Currently other countries, including Canada, are reviewing the status of Huawei. One of the concerns is that a new law in China requires any domestic firm to assist the Chinese government when requested to do so. Another concern is allegations that Huawei has circumvented trade sanctions against countries such as Iran and North Korea. It is based on these types of allegations that the United States has requested that Canada arrest Huawei CFO Meng Wanzhou in Vancouver for extradition to the United States where she will face charges such as bank fraud, obstruction of justice and theft of technology from the United States Justice Department. In a response that many believe is related to this action several Canadians in China have now been imprisoned in some cases under very questionable circumstances. The situation has become very complicated diplomatically as Prime Minister Trudeau was forced to fire John McCallum, the former Liberal cabinet Minister that Mr. Trudeau had appointed to be Canada’s Ambassador to China. It should be noted that Huawei denies accusations of corporate espionage and spying; that said the Polish government recently arrested a Huawei employee on spying charges. The Czech government has also warned their citizens against using Huawei equipment for security reasons. China has also warned Canada that there will be consequences to Canada if Huawei is banned. Conservatives believe that Canada, as a member of the “Five Eyes” intelligence network, should stand with our allies in banning Huawei from participating in our 5G rollout in Canada. To date the Liberal Government continues to state that it is reviewing this situation with no decision yet being made. My question this week: Do you agree that Huawei should be banned from participating in the 5G network in Canada? I can be reached at Dan.Albas@parl.gc.ca or call toll free 1-800-665-8711.
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 This week, the newly updated Canada Food Guide was released
The previous guide had been unchanged for 12 years. The new food guide takes a very different approach than the previous versions did. Foods are no longer categorized into groups such as ‘dairy’ or ‘meat’ and terms such as ‘beef’ have been replaced by the term ‘protein’. Suggested serving sizes have also been eliminated and instead the guide advises “notice when you are hungry and when you are full.” The new guide also recommends more plant based food consumption including an effort to avoid saturated fat, sugars and sodium where possible. Although some disagree with the approach, overall I believe this promotes healthier eating habits. What is new is that guide also makes recommendations on how you should eat and provides some other interesting suggestions. “Grow, harvest, fish, hunt and prepare food in traditional ways.” is one such recommendation that may be more challenging for those living in urban centres. There is also the recommendation to drink more water. The food guide even provides helpful information that you can drink water “hot or cold” and that you can “drink water with your meals”, in the event you were unaware of that tidbit. If you are shopping, the guide recommends you “shop for sales” and “check out flyers and coupons” because this can make food shopping more affordable, also in the event you were unaware of that fact. Other recommendations are to cook more meals at home and to be aware of “food marketing”. The guide suggests that being aware of food marketing can help you “question why you want to purchase a certain food or drink”. Overall, while I believe the new food guide is well intended and promotes a healthier diet, I do question if Canadians need to be advised on how to eat, shop and interpret food marketing. My question this week: Do you prefer a food guide the focuses on nutrition, portion sizes and diet or do you prefer the new direction with advice on how to eat, shop and more? I can be reached at Dan.Albas@parl.gc.ca or call toll free 1-800-665-8711.  As many accountants and tax professionals will know, January of each year is the opening of “income tax season”– the period of time up until April 30th when in this case your 2018 income taxes must be filed with the Canada Revenue Agency.
If you follow political discussions you will likely have heard claims that income taxes have gone up as well as counter claims that they have gone down. For this week’s report I wanted to review federal income tax changes over the past 18 years for more context on this subject. Going back to the year 2000, at that time there were just three federal income tax brackets, your first $30,004 was taxed at a rate of 17%, the next $30,004 up to $60,009 was taxed at a rate of 25% and all income over $60,009 was taxed at 29%. In 2013, there were some significant changes. A fourth income tax bracket on your income up to $43,561, that would be taxed at a lower rate of 15%. The second tax bracket was adjusted so that income between $43,562 up to $87,123 was taxed at a rate of 22%, while the third tax bracket on income over $87,123 up to $135,054 was taxed at a rate of 26%. Income over $135,054 was taxed at 29% The net effect of these tax changes was that lower income workers earning up to $43,561 paid 2% less tax. On income in the other tax brackets there were also tax breaks of 3% with the exception of the highest tax bracket. In the 2016 tax year there were again further changes to the tax brackets including the addition of a 5th tax bracket. For the lowest income earners up to $45,202 there was no change and the income tax rate remained at 15%. On the next tax bracket from $45,202 up to $90,563, taxes were reduced from 22% in 2015 down to 20.5%. Income between $90,563 up to $140,388 remained unchanged at 26% and income over $140,388 up to $200,000 was taxed at the same 2015 tax rate of 29%. The new 5th tax bracket on income over $200,000 was taxed at 33%. The net effect of these tax 2016 changes was that lower income citizens did not receive a tax break but those in the middle did. Higher income earners were taxed either at the same rate or more. For this current 2018 tax year the income tax brackets remain unchanged at 15%, 20.5%, 26%, 29% and 33% respectively. This comparison does not include the elimination of many income tax credits that have occurred since 2016 nor does it account for the lowering of the GST. It also does not include the Working Income Tax Benefit that is now referred to the Canada Workers Benefit or to the Canada Child Benefit (CCB). Depending on your income tax situation, you may be paying more or less since the year 2000. Given the scale of tax reduction to many income tax brackets in 2013, combined with the middle income tax bracket reduction in 2016, many Canadians are likely paying less federal income tax today. Although there have been tax reduction efforts federally, most will know that income taxes in many provinces have risen in addition to increases in property taxes. My question this week: Are you satisfied with the total amount of tax that you pay for the services and programs you receive? I can be reached at Dan.Albas@parl.gc.ca or call toll free 1-800-665-8711.  In last week’s report I referenced higher CPP premiums, that will increase from 4.95% up to 5.95% gradually between 2019 and 2023, resulting in lower take home pay for many Canadians.
If you have been watching television, it is possible that you may have even come across commercials from the CPP Investment Board that state “you started saving for retirement with your first paycheque.” I have received complaints over the fact that a true savings account is one that citizens can voluntarily withdraw from, whereas CPP contributions do not offer this flexibility. I have also received enquiries and comments about CPP and other federal government retirement programs. For those who may be unaware, here is a summary about the different programs that the Federal Government administers. These include the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). CPP is generally funded equally by you and your employer during your working years. CPP can provide benefits for loss of income created by disability or retirement. The benefits are ultimately calculated by how much you have contributed and over what length of time. You can start collecting CPP as early as 60 or as late as 70, however different rates would apply. In contrast, OAS provides a modest pension to most Canadians at age 65, if you have lived in Canada for at least 10 years. The maximum OAS payment is for individuals with 40 years or more of residency after their eighteenth birthday. Seniors with earnings in excess of roughly $77,580 per year will gradually receive a lesser OAS benefit that ultimately is eliminated for an income in excess of $ 125,696 a year. The GIS is specifically for lower income seniors 65 and older with an income of roughly $18,239 annually or less. If you have questions for any of the above programs you can contact Service Canada toll free at 1-800-622-6232 for further information. I have heard many comments over the recent increase in CPP premiums. One common complaint is that if a person does not live to 65, or not long after, the amount that can be transferred to spouse, after a lifetime of CPP contributions, is comparatively quite limited. My question this week: Would you support more equitable options to transfer your lifetime CPP contributions to your estate or to another investment program? I can be reached at Dan.Albas@parl.gc.ca or call toll free 1-800-665-8711.  It was not long into the new year when a citizen shared with me an email they received from their employer stating Statutory Canada Pension Plan (CPP) "deductions are reset for the new year so you will notice a decrease in your net take home pay starting in January”.
The citizen asked if this information was correct and if so, what are the reasons for it? As I reported back in July and October of 2016, the Trudeau Liberal government raised CPP premium rates. The changes mean that beginning this year and for every year until 2023, the mandatory CPP contribution rate will be gradually increase from the former rate of 4.95% up to 5.95% in 2023. It is true that in most situations your net take home pay will be less because of this CPP increase. Likewise, for an employer the costs of making payroll will also correspondingly increase. The intent of these CPP changes is to increase the total annual CPP benefit (assuming an individual reaches age 65). As an example, the current maximum CPP benefit is $13,110 a year. This CPP maximum benefit would increase by $4,390 per year up to a new maximum of $ 17,500 annually. Keep in mind the maximum benefit figures only apply to those who contribute the maximum CPP contribution for roughly 40 years. For most workers, the rates will vary. One of the downsides to the CPP program is that it is not a transportable retirement investment. For citizens who do not live to reach 65 or only live a few years beyond 65, a lifetime of contributions paid to CPP are of no significant benefit to a spouse or family in that the full value of the contributions cannot be transferred through to an estate. So where would those unused CPP contributions end up? One of the lesser known criticisms of CPP is the fact that your CPP contributions are being consumed by significantly rising administration costs. Operating costs went from $3 million in the year 2000 to $803 Million in 2015, not to mention external management fees that have risen from $36 million in 2006 to $1.25 Billion in 2015. These are serious administration increases. The Canadian Federation of Independent Business (CFIB) released a poll indicating that 70% of business owners have indicated that the costs of the CPP premium increase will create cost pressures to freeze or cut salaries. While an increased CPP benefit may appear to help younger people the most, perversely higher payroll taxes can discourage hiring of youth, who already face significantly higher unemployment rates due to a lack of experience. For some, finding that first job will be tougher. In response to these increased costs the Trudeau Liberal budget for 2019 will lower the small business tax rate to 9%. This was the same small business tax cut that was originally legislated by the former Conservative government, cancelled by the Trudeau government in Budget 2016 and was only reinstated after significant political pressure. My concern is with reduced take home pay, courtesy of the increased CPP deductions, coupled with recent provincial announcements to increase ICBC rates, as well as many local governments increasing property taxes at rates beyond inflation, citizens are being collectively squeezed from all levels of government. From my perspective it should never be overlooked that there is only one taxpayer and when the Prime Minister refers to the concept of a balanced budget as being an “austerity” measure, this points to a road of future tax increases to pay for deficit spending. My question this week is a simple one: Are you concerned by having your net take home pay reduced by increased CPP premiums? I can be at Dan.Albas@parl.gc.ca or toll free at 1-800-665-8711. |
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March 2023
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