Blog by Acton Accounting & Bookkeeping Inc.
Read our blog to know about the various trends in the accounting & bookkeeping world!
Great Accounting Tips that can Actually Save you on Taxes
Tax Freedom day from last year. Breakdown by provinces & territories. Source: Fraser Institute
Taxes levied on your hard earned money is neither pleasing to hear nor gratifying to pay. But for the services provided to us by our government, we are obliged to and should pay our taxes correctly and on time.
Saying and doing what you say have an inverse relationship. So is the case here. Talking about income tax is simple, but when it’s time to pay them, it is a nerve-racking task. Certainly, to let go your hard-earned money in the form of income tax is no one’s first choice. Those who are thankful to the government for the facilities provided to the country’s citizens, do return their favours. And, those who are ignorant find ways and means to evade their taxes.
It must be kept in mind that evading taxes is not the right thing to do. It can lead to adverse consequences. Everything can be done the right way; through tax avoidance and not tax evasion.
Canada celebrates Tax Freedom Day every year; this year it was June 7, 2016. This implies that after the 7th of June, you are not required to pay any taxes to the government. After clearing all their taxes for the year, the citizens of Canada can save their income for themselves after the tax freedom day.
How can you save your money?
It is always a delight to save on your taxes. So, we provide you with some investment options that will help you reduce the amount payable as income tax, without landing you into a troublesome situation.
- Invest in a Tax Free Savings Account (TFSA): Residents of Canada, above the age of 18 years, are eligible to invest in a Tax Free Savings Account. The money invested in TFSA is non-taxable. A TFSA can be operated lifelong, and the interest and withdrawals are exempt from taxes.
- Invest in Registered Retirement Savings Plan (RRSP): As the name suggests, Registered Retirement Savings Plan is for long-term tax savings. Taxes will be deducted for those who fall in the lower income group or those who have invested in Spousal RRSP (i.e., the spouse is the annuitant, and the contributor’s tax is deducted). However, any withdrawal is taxable.
The Game of Tax Evasion
Tax evasion is a never ending problem in nearly every country. Even though, the government punishes the cheats and frauds, the crime rate is still high. The government of Canada dealt with tax fraud by making it legal. In this quest for legalizing tax deceit, the Canadian government has signed 92 treaties with tax haven nations like Barbados, Jamaica, and Malta.
The tax haven nations have nearly zero percent tax rates as compared to Canada. They also offer a high degree of bank and financial secrecy. This attracts the foreign business investors who are now taxed only once and that too at a much lower rate. So, they avoid the higher tax rate without committing any fraud.
The tax treaty signed by the government of Canada in 1980 was a boost to the Canadian business sector. According to the terms of this treaty, the Canadian companies which invested in Barbados and earned a profit were taxed at the Barbadian rate which was 2.5 per cent.
The tax treaties were a mere source for tax exemption. As the business income was generated in another country, the tax was charged only once. So, if a Canadian business person had set up a business in Barbados, he will be levied a tax at the Barbadian rate. When the same income goes back to Canada, no tax will be levied on it.
The downside side of the tax treaties
- It was found that the capital generated in Canada went to Barbados tax-free.
- As a result, profits were going out and debt was coming in Canada.
- The consequence of these treaties was that, those who earned the most paid the lowest taxes, and the middle class had to suffer by paying higher taxes.
Even though, the businesses set up in foreign countries are legally avoiding taxes, there is much to be known. These businesses conduct fraud and indulge in illegal accounting.
IN THE NEWS
China’s biggest e-commerce firm, Alibaba, made news recently with its fraudulent accounting practices. The company admitted to America’s Security and Exchange Commission that it has undergone government enquiries and investigations in the recent times. On the other hand, supporters of the Chinese e-commerce industry and Alibaba have rejected the allegations and said that they have committed no fraud.
FOLLOW THE RIGHT PATH
Tax evasion, fraud, or bad accounting practices- whatever the reasons may be, businesses can face a tough time without any prior notice. It is no doubt, better to engage in ethical business than to suffer misfortune.
Filing your taxes, and keeping a track of your accounts and financial statements will always prove beneficial for you and your business. If you have a hard time managing your accounts, then you should hire professionals. They will not only ease the work for you but also guide you in the right direction to save on your taxes.
Acton Accounting and Bookkeeping Inc. in Vancouver is always ready for your help when you are in need of professional accountants. They guide you in solving your business and personal tax problems and devise financial policies in your favour. They can handle all your tax computations and assist you in accounting and bookkeeping services. Offering a wide range of services like tax planning, tax computations, and accounting and bookkeeping, Acton Accounting and Bookkeeping Inc. is an experienced source to contact for accounting and bookkeeping services.
- » Busted! Don’t Believe These Accounting Myths!
- » Season's Greetings from Acton Accounting & Bookkeeping Inc.
- » Common Mistakes to Avoid When Filing your Taxes
- » What Our Customers are Saying About Us
- » Morneau expects to be hit personally by closing tax loopholes
- » Top Five Things to Look for When Hiring an Accountant
- » Why Hire Acton Accounting and Bookkeeping Inc.'s Services
- » Announcing the new website