INCOME TAX versus OPPORTUNITY TAX

INCOME TAX -- A reasonable Tax in most cases

Every employed person in Canada, who has an annual income in excess of their basic personal exemptions, is taxed at both the Federal and Provincial/Territorial levels of Government.

All persons, in the same circumstances, are taxed at the same level, and although we do not like taxes the equality factor goes a long way towards our acceptance of the tax burden.

When we are taxed real dollars on real monetary income the system works to everyone's advantage, or disadvantage, equally.

But supposing you and your neighbour have identical incomes and identical family situations but for no good reason your income tax is several times larger than his! What then?

What if you then contacted Revenue Canada for an explanation and were told the extra taxes imposed on you are due to an opportunity that you had, (but missed), last year to receive an income that would justify those extra tax dollars -- What then?

Would you accept Revenue Canada's explanation and cheerfully fork over those extra tax dollars? NOT VERY LIKELY.


OPPORTUNITY TAX -- An unfair tax under any and all circumstances.

Believe it or not there are tens of thousands of Canadians who have been levied HUGE
taxes on pretend "Annual Incomes" that they never received.

For reasons beyond anyone's comprehension Revenue Canada has ruled that shares, of intangible value, have a tangible value BUT ONLY IF the person receives those shares from their employer. who happens to be incorporated in Canada and, who has shares trading publicly on a conventional stock exchange.

Under those circumstances the shares are ruled to be a "Taxable Benefit" from the moment they are ordered, (vested), and again when they are deemed to have been received, (exercised), which may be as much as a year later. Between the time of vesting and exercising the employee has no control over the shares whatsoever.

If the shares go down in value, during this interval, then the employee is not taxed, but can not apply any of the "LOSS" realized against any prior, or following, GAIN because the shares are classed as a "Taxable Benefit"(not a Capital Investment), and any potential gain is reported, at the current inclusion rate, as:- "Employment Income" -- whether the shares are actually sold or not.

The reported "Employment Income" inflated by the potential profit is then taxed at the level applicable to a real income of the higher level -- often resulting in a tax levy that is far greater than the employee's total real annual income. This unfair tax scheme has resulted in many participants, in their employer's share incentive/reward plans, being obliged to borrow money, and/or mortgage their homes in order to try and meet the ridiculous tax burden imposed on them.

Fair Taxation, according to Revenue Canada, consists of allowing those who had large potential "Employment Incomes", as a result of the "Taxable Benefit" scam, to apply for a deferment of up to $100,000 per year of "Taxable Benefit" taxes. The deferment can be renewed annually by filling out a form T1212 every year thereafter.

The deferment does not relieve the vicitm from eventually having to pay those taxes.
If the person sells, trades, or converts the subject shares, or the person leaves the country, or dies -- then the deferred taxes become payable immediately. Most vicitms of this unfair tax levy can not get as much as a tenth of the taxes owing by attempting to sell whatever shares they may have left.

This type of legalized robbery has been in existance through the recent terms of the prior Liberal government and for most victims is still in operation under the current conservative government. It appears that some correction was attempted by the current government when the Conservative MP, Gary Lunn in British Columbia, succeeded in getting a tax relief deal for some JDS Uniphase victims in his riding. This deal was reported by Columnist Jamie Golembek in an article that appeared, last fall, in the National Post Newspaper, titled:- "What about the rest of us?"

There are thousands of similar victims both in British Columbia and accross the rest of Canada, that have not received similar treatment and the present Government is keeping very silent on this issue -- to the present time. Not a very good performance for a Governement that has "Fair Taxation" in their policy statements.

To see other posted articles authored by Victor Drummond search google for this author.

Vic