Latest news with #taxes
Yahoo
16 hours ago
- Business
- Yahoo
It's time Canada took another look at how it taxes death
In 1789, one of the founding fathers of the United States, Benjamin Franklin, famously wrote in a letter that 'In this world nothing can be said to be certain, except death and taxes.' So true. But what happens when a death occurs? Does the taxman take an interest? Around the world, the answer is an emphatic 'yes.' However, the form of such taxes can vary widely. For example, some countries have an estate tax based upon the fair market value of the decedent's property at death. There is often a basic exemption for such amounts so that it is only the amount of the estate in excess of that exemption that is subject to tax. The U.S. and a handful of other countries, such as the United Kingdom, South Korea and Denmark, have a traditional estate tax. In the U.S., it's fair to say the estate tax is more of a symbolic tax. It was originally established in 1916 with the stated policy objective of preventing dynastic wealth accumulation. The exemption amount is now US$15 million (but it will be indexed to inflation starting in 2026) as implemented by the One Big Beautiful Bill. Such a large exemption exempts the vast majority of deaths from the tax. For example, in 2022, the U.S. estate tax applied to only about 3,900 taxable estates — roughly 0.11 per cent of deaths — and raised approximately US$22.5 billion out of total federal revenues of approximately US$4.9 trillion. In other words, it's a pittance. Most tax practitioners know it's pretty easy to walk around the U.S. estate tax. It's fair to say the estate tax has failed to achieve its original policy objective. In other countries, an inheritance tax is common, and the recipients of a deceased's estate pay it. Countries such as Germany, France, Belgium and others deploy this type of regime. There are a variety of other death tax regimes, like a capital acquisitions tax in Ireland that is triggered when an individual acquires wealth, either through inheritance or gifts. Chile has a similar regime. Other countries, such as Greece, Italy and parts of Latin America, have stamp or notarial duties that apply when people register their inheritances. What about Canada? It introduced an estate tax in 1947 and it operated similarly to the U.S. model. In 1966, the Royal Commission on Taxation recommended the country abolish it and instead introduce an inheritance tax. 'The estate tax fails to account for the economic position of those who receive the assets and cannot be properly integrated with a personal tax system based on income and individual ability to pay,' its report said about the estate tax. 'We believe that an integrated income tax system should treat all accretions to wealth, whether earned or unearned, as part of the taxpayer's income, and that gifts and inheritances should be included in income for this reason.' In the end, after much debate and consideration, the government chose to abolish the estate tax and not introduce an inheritance tax as recommended by the commission. It appears that, like today, any form of death tax in the late 1960s and early 1970s was very unpopular with voters. Accordingly, Canada decided to introduce a deemed disposition upon death rule as part of the introduction of capital gains tax effective Jan. 1, 1972 (previously, capital gains were not taxable). The new regime treated death as a disposition event of one's worldwide property, with any resulting gains included in their final income tax return. Such a regime combines with the acceleration of deferred income inclusions — such as registered retirement savings plans and registered retirement income funds — which are included in income upon death. This overall regime has had some tweaking over the years, but the basic architecture has remained since 1972. There are a number of exceptions to the deemed disposition and deemed income inclusion tax. For example, if the deceased's assets all vest with a surviving spouse or common-law partner, the tax is deferred until the survivor's death. Canada's regime is very unique. Has it served Canada well? It's fair to say it was and continues to be a clever compromise to avoid the administrative complexities of an estate tax and/or inheritance tax. It's also less politically charged than a traditional estate or inheritance tax, which is often thought to be unfair given that it may result in double tax (since assets are usually accumulated with after-tax amounts and taxed again at death) and liquidity issues (the liquidity issue is diminished for an inheritance tax, however). Notwithstanding, it's time Canada took another look at how it taxes death. From a tax policy design perspective, using death as a trigger for taxation makes sense given its administrative efficiency. But does our current regime help prevent dynastic wealth? Should it? Do we care? Are there reasons to not tax upon death so as to assist with generational wealth accumulation, especially for lower- and middle-income families who have modest assets? Benjamin Franklin wasn't wrong. Death and taxes are certain. But that doesn't explain why most Canadians have no idea how the two collide. That lack of financial literacy comes at a cost. As trillions in wealth prepare to shift between generations, Canada cannot keep pretending that our current approach to taxing death is sacrosanct. It may be efficient, but is it fair? Does it need updating? Prime Minister Mark Carney's commitment to an 'expert review' of our corporate tax system is the same tired half-step we've seen for decades. What the country needs is a full-scale, unapologetic review of the entire tax system, including how we tax death. Canada's personal tax rates need to come down. Here's how to do it CRA keeps messing up despite an increased headcount and bigger budget It's time for grown-up conversations before the taxman has the last word. 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@ and his LinkedIn profile is __________________________________________________________________________________________________________________________ Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Independent
17 hours ago
- Business
- The Independent
Trump hits out at Starmer over taxes and says North Sea oil is ‘treasure chest' for UK
Donald Trump has hit out at Keir Starmer 's taxes on North Sea oil just hours after praising the prime minister when the two met at his Scottish golf course. The president said the resource is a "treasure chest for the United Kingdom" as he urged Starmer to 'incentivise the drillers'. It comes less than a day after Trump described Sir Keir as 'strong' and 'respected' in an impromptu press conference on Monday, even saying that he wanted 'to make the prime minister happy.' Now the president has used his Truth Social network to attack North Sea oil taxes, which he said make 'no sense'. He posted: 'North Sea Oil is a TREASURE CHEST for the United Kingdom. The taxes are so high, however, that it makes no sense. 'They have essentially told drillers and oil companies that, 'we don't want you.' Incentivize the drillers, FAST. A VAST FORTUNE TO BE MADE for the UK, and far lower energy costs for the people!' The move will come as a blow to the prime minister, who was seen to have had a successful meeting with the president. In a hugely significant move Trump even removed a key obstacle to Sir Keir officially recognising a Palestinian state, as the prime minister prepares to discuss the issue at a crucial cabinet meeting later. On Monday the Republican leader also advised Keir Starmer to cut taxes and tackle immigration to beat Farage's Reform UK party at the next election. Asked about the Reform UK and Labour leaders, he said: 'The one who cuts taxes the most, the one who gives you the lowest energy prices, the one who keeps you out of wars, tend to win. "Low taxes, keep us safe, keep us out of wars….And in your case a big immigration component,' he added. He also said that he thought he had won his most recent election to the White House because of immigration. Earlier during his visit to Scotland, he praised the city of Aberdeen as the oil capital of Europe and repeated his long opposition to wind turbines, calling them "ugly monsters". In May Mr Trump, who has been vocal in his opposition to wind turbines for many years, used another a post on Truth Social to say: 'Our negotiated deal with the United Kingdom is working out well for all. 'I strongly recommend to them, however, that in order to get their Energy Costs down, they stop with the costly and unsightly windmills, and incentivize modernized drilling in the North Sea, where large amounts of oil lay waiting to be taken.' Mr Trump, who owns a golf course in Aberdeenshire, added that there was a 'century of drilling left, with Aberdeen as the hub'. President Trump has been vocal in his opposition to wind energy and has previously ranted about 'big windmills' that 'destroy everybody's property values, kill all the birds'. He has also claimed that they are unreliable energy sources, once bizarrely saying, 'and then, all of a sudden, it stops; the wind and the televisions go off. And your wives and husbands say, 'Darling, I want to watch Donald Trump on television tonight. But the wind stopped blowing and I can't watch. There's no electricity in the house, darling'.'
Yahoo
18 hours ago
- Business
- Yahoo
Barclays joins rival in cautioning against hiking bank taxes
The boss of Barclays has become the latest to caution the Chancellor against hiking taxes for banks in her autumn budget as she looks to bolster the public finances. Group chief executive CS Venkatakrishnan, who is also known as Venkat, said that increasing taxes for banks – or other important sectors of the economy – was not consistent with aims to boost economic growth. He said banks were already 'among the biggest tax payers in this country' and an important sector to help drive economic activity, with growth 'the primary objective for the UK'. 'There are many other important sectors. 'We want all those sectors to prosper,' he added. His comments come after Lloyds Banking Group chief executive Charlie Nunn said last week that raising taxes on banks would be at odds with the Government's pro-growth aims. There has been increasing speculation that Chancellor Rachel Reeves may look to raise taxes, with the banking sector rumoured to be among those potentially in the firing line, as she faces pressure over the UK's public finances following higher-than-expected Government borrowing and U-turns on some spending cuts. Venkat's comments came as the group revealed that half-year profits jumped by nearly a quarter thanks to an investment banking boost amid financial market volatility sparked by US President Donald Trump's tariff war. The high street lender reported a 23% rise in pre-tax profits to £5.2 billion for the six months to June 30. This came despite it booking credit impairment charges of £1.1 billion, up from £897 million a year earlier, after putting by another £469 million in the second quarter. The bank said the rise was largely due to its takeover of Tesco Bank and a more uncertain economic outlook, especially in the US. Its results were better than expected for the second quarter, with profits up 28% to £2.5 billion thanks to forecast-beating revenues in its investment banking arm amid market volatility. Income in its investment banking business lifted 10% to £3.3 billion in the second quarter. Venkat said: 'We remain on track to achieve the objectives of our three-year plan, delivering structurally higher and more stable returns for our investors.' Barclays unveiled more returns for investors, with plans for another £1 billion in share buybacks, and said it has cut around £350 million of costs out of the £500 million in savings planned for 2025.
The Independent
18 hours ago
- Business
- The Independent
Barclays joins rival in cautioning against hiking bank taxes
The boss of Barclays has become the latest to caution the Chancellor against hiking taxes for banks in her autumn budget as she looks to bolster the public finances. Group chief executive CS Venkatakrishnan, who is also known as Venkat, said that increasing taxes for banks – or other important sectors of the economy – was not consistent with aims to boost economic growth. He said banks were already 'among the biggest tax payers in this country' and an important sector to help drive economic activity, with growth 'the primary objective for the UK'. 'There are many other important sectors. 'We want all those sectors to prosper,' he added. His comments come after Lloyds Banking Group chief executive Charlie Nunn said last week that raising taxes on banks would be at odds with the Government's pro-growth aims. There has been increasing speculation that Chancellor Rachel Reeves may look to raise taxes, with the banking sector rumoured to be among those potentially in the firing line, as she faces pressure over the UK's public finances following higher-than-expected Government borrowing and U-turns on some spending cuts. Venkat's comments came as the group revealed that half-year profits jumped by nearly a quarter thanks to an investment banking boost amid financial market volatility sparked by US President Donald Trump's tariff war. The high street lender reported a 23% rise in pre-tax profits to £5.2 billion for the six months to June 30. This came despite it booking credit impairment charges of £1.1 billion, up from £897 million a year earlier, after putting by another £469 million in the second quarter. The bank said the rise was largely due to its takeover of Tesco Bank and a more uncertain economic outlook, especially in the US. Its results were better than expected for the second quarter, with profits up 28% to £2.5 billion thanks to forecast-beating revenues in its investment banking arm amid market volatility. Income in its investment banking business lifted 10% to £3.3 billion in the second quarter. Venkat said: 'We remain on track to achieve the objectives of our three-year plan, delivering structurally higher and more stable returns for our investors.' Barclays unveiled more returns for investors, with plans for another £1 billion in share buybacks, and said it has cut around £350 million of costs out of the £500 million in savings planned for 2025.
Telegraph
19 hours ago
- Business
- Telegraph
Reeves can raise taxes as much as she likes, but it won't bring in any more money
The IMF has warned Chancellor Rachel Reeves that she must make tough choices to cut the UK's deficit, potentially including some combination of raising taxes on working people, abandoning the pensions triple lock or charging for the NHS. The first of these options – raising taxes – is considered politically the most likely. After all, Labour MPs didn't even agree to cuts to winter fuel payments. It's impossible to imagine them agreeing to cut the NHS, and abandoning the triple lock seems like political suicide. Yet it's highly doubtful whether raising tax rates further will produce any more tax revenue out of the UK economy. Even as matters stand, taxes are scheduled to go higher than they've ever been since World War II, and to be around 37½ percent of GDP for the rest of this Parliament. But that considerably understates the situation. Prior to 2021/22 they'd only ever once been above 35 percent of GDP since the 1950s, in 1969/70, and then for only one year before falling back sharply. Thereafter, until the 2020s, it was rare for them to be above 33½ per cent of GDP. We aren't merely at a record. We are at an out-of-the-park record scheduled to be sustained for an absolutely unprecedented period of time. The chances of the UK economy delivering even the tax levels already scheduled are slim, let alone imagining taxes could be raised a lot further. Yet despite these astonishing record-high taxes, the economy is still running a large deficit of over 5 per cent of GDP. Remember the 'Maastricht Convergence Criteria' requiring budget deficits to be no higher than 3 per cent of GDP? Well, we're way above that. When the deficit exceeded 6 per cent of GDP in the 1990s we had a significant fiscal consolidation under Norman Lamont and Kenneth Clarke. Yet at that time the UK's national debt was under 40 per cent of GDP. Now it's over 100 per cent. Our situation is way worse than it was in the early 1990s. We need a fiscal consolidation to address that 5 per cent deficit. But the current thinking appears to be that all of that deficit cut will come from tax rises. Indeed, possibly more than all of it, because spending will probably go up further. To balance the books we'd need to rise from that record 37½ per cent of GDP spending to over 42½ per cent. Add in a percentage point for further spending rises and we'd be over 43½ per cent or fully 10 percentage points of tax higher than the UK has ever produced on a sustained basis in well over 80 years. One key reason tax takes top out at some point relative to GDP is that they destroy growth. Over the long-term having a high share of tax in GDP damages long-term growth – each 10 per cent rise in tax reduces the growth rate by around 1.2 per cent – which in the UK's case would mean reducing its sustainable growth rate to zero. In the short-term, raising taxes often triggers recessions, bringing down tax revenues. That loss of tax revenues as growth peters out, or outright recession ensues, means that tax-based fiscal consolidations typically don't work. If you have a high deficit, raising taxes is almost never a way to cut that deficit – even if it were a Good Thing to have higher tax in itself, it simply doesn't work in that situation. The normal advice the IMF and similar bodies used to provide in fiscal consolidations was that they should be predominantly spending cuts-based. The IMF often used a rule of thumb of about two thirds spending cuts to one third tax rises. The EU used much the same rule of thumb in the Eurozone crisis era austerity programmes. However, the most successful consolidations – the ones where the deficit falls and stays down, with debt dropping away relative to GDP over time – tend to have higher ratios of spending cuts, of around 75 to 80 per cent to 20 to 25 per cent tax rises. We need at least that ratio in the UK now, if not higher. But that is not what Labour backbench MPs will ever agree to.
