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Tax time again ... let's review where things stand

By Walter Robinson
web posted April 30, 2001

Canadians, today your taxes are due. If you've already filed your taxes and received your refund by taking advantage of Netfile, Canada Custom and Revenue's on-line approach to tax filing, kudos to you. And to be fair, it was quick and easy.

On the other hand, if you're still scrambling to get your taxes done, you have until midnight tonight. If you owe the feds money and are late in filing, you'll pay a penalty of 5 per cent of the taxes you owe. But if you procrastinate and file in June with taxes owing your penalty jumps to 6 per cent. And this tax grab penalty jumps by 1 per cent a month up to 12 months for a maximum penalty of 17 per cent.

Ottawa already squanders billions of dollars in corporate welfare grants and loans along with its well-publicized follies over at HRDC, so please do yourself and the country a favour, file on time. Less penalties collected equals less dollars wasted.

But tax time also raises a question: Who is paying the federal freight and how much are they paying? While the numbers aren't final yet, we have obtained preliminary data for the last taxation year available (1998) from Canada Customs and Revenue and they are worth a gander.

In 1998, Canadians were assessed to pay a record $78.587 billion dollars in federal income taxes. That year there were 21,383,360 tax filers and Canadians filed tax returns and 14,576,970 of them actually had to pay taxes. So the average federal income tax bill for each and every Canadian taxpayer was $5,391.18.

A closer look at data is even more revealing. We have divided taxpayers into four income quintiles based on their total income:

Q1 – less than $30,000;
Q2 – from $30,000 to $60,000;
Q3 – from $60,000 to $100,000; and
Q4 – above $100,000.

Tax Returns Filed

Q1 14,206,970 66.4 %
Q2 5,338,890 25.0 %
Q3 1,395,340 6.5 %
Q4 442,660 2.1 %
21,383,360 100.0 %

Taxable Returns

Q1 7,452,190 51.1 %
Q2 5,295,960 36.3 %
Q3 1,389,390 9.5 %
Q4 439,430 3.0 %
14,576,970 100.0 %

Taxes Paid

Q1 $10.86 billion 13.8 %
Q2 $29.27 billion 37.2 %
Q3 $17.44 billion 22.2 %
Q4 $21.01 billion 26.7 %
$78.58 billion 100.0 %

Even though they represent a mere 12.5 per cent of all taxpayers, Canadians earning over $60,000 a year pay 48.9 per cent, or almost half of all federal income taxes. Meanwhile, 51.1 per cent of Canadians earning under $30,000 pay just 13.8 per cent of all taxes paid.

Contrary to repeated assertions of the NDP and a "big government" special interest groups from unions to social justice coalitions, middle and upper income Canadians are indeed paying their "fair share" of income taxes.

So what is Ottawa doing with this money? Apart from funding programs and transfers to the provinces, some $42 billion of it ($115 million each day) continues to pay interest on our $565 billion national debt. And Statistics Canada pointed out last week that net debt for Ottawa, the provinces and territories and our local governments stood at $852.5 billion in 1999. This figure represented a whopping 91.8 per cent of annual GDP for the same year. That's $28,038 for every woman, man and child in Canada.

We can only hope that federal Finance Minister Paul Martin will use next month's economic statement to live up to last October's commitment of at least $10 billion in debt reduction. Given that Finance recorded a $20 billion surplus for the 11-month period ending in February, even with year-end adjustments, Canadians should expect a debt repayment between $13 billion and $14 billion for fiscal 2000-2001. Indeed, it would be good news just after tax season.

Walter Robinson is the Federal Director of the Canadian Taxpayers Federation.

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