Ottawa's tax hike on the one per cent ended up lowering government revenues | General financial discussion | Discussion forum

Huh... the rich won't stand still while you fleece them... who woulda thunk it....

Loonie, your comment is coming across very derogatory to the rich. The one-percenters pay a huge portion of our country’s tax bill and your comment makes it appear that they should just bend over and take it when they are asked to pay more than they currently do. Do you pay more tax than the tax laws tell you you’re supposed to? Do you take the GIC your bank offers you or do you do your research and search the best rate that is legally available to you?

As a former business owner, I indeed paid a lawyer & accountant to set up a family trust and holding company. This allowed me to defer some income to pay less tax over my lifetime. I paid A LOT of tax over the years, but this process allowed me to sell my company and retire at a very young age. So yeah, I took your comment personally.

Go ahead, take it personally if you want.
We too had a corporation, and paid far too much to accountants and lawyers. It's the gov't that is at fault for having such a complex system and allowing so many loopholes, which require accountants and lawyers to sort out - and it doesn't matter which party is in power. I've never met a small business person who hasn't complained at length about the time, effort, and worry it took them to deal with it.

I have benefitted from some rules that I didn't really think were fair in the larger sense, but you don't have a lot of choice, given the complexity of the system. No doubt some people have a clearer sense of entitlement.

In my opinion, these options of trusts and putting income forward and sharing with family members ought not to be allowed. Just my opinion. You needn't worry. It will never happen.

And, by the way, this has nothing at all to do with looking for the best return on your GICs. That does not negatively affect the government's budget. In fact, it helps. The more interest you get, the more income tax you pay!

Thanks for the laugh, Bill, but I don't believe for one second that a bank would increase its GIC rates with the expectation of losing money. I'm sure you are aware that when GIC rates go up, loan interest rates and bank income also goes up.

Banks cut staff whenever it suits them to do so.

Of course, exact figures on profits vary, just as our average GIC income varies from year to year depending on rates and maturities. And when they take on risky ventures, there is a higher probability of both winning and losing. The bigger the bank, the more risky ventures they take on - just like big pension plans. Yes, bank profits vary, just like my GIC income does.

What matters in the case of GICs vs related loans is the spread, i.e. the difference between the loan rate and the GIC rate. This is where the profit is made in that part of their business.

When interest rates bottomed out, the banks were complaining that the spread was so small that they were having more trouble making money. Low interest rates were bad for them. And, indeed, some people mentioned on this forum that the GIC and loan rates were so close that they wondered how any profit could be made. Others informed us that term loans and GICs were always matched, that this is how the banks do business.

Did I say that banks were the only ones who used their discretion in hiring and firing? No. So the fact that others do it is irrelevant, as is the notion that it's related to GIC rates.

If this particular tax did not work out as hoped, it has nothing to do with GIC rates. It's even possible that it was instituted mostly for "show", to make it look like they were taxing the rich when they really weren't. They would have or should have known the routes people would use to avoid it. With the amount and kind of experience Morneau has in the financial industry, it's not rocket science.