Tax: The Secret Ingredient to Resilience

Beth Graddon

Tax knowledge matters. It’s the hot value-add for anyone in the business of providing financial advice. Two new reports highlight why: the tax burden of the average Canadian is significant, and helping your clients understand key tax savings opportunities matters when implementing sound wealth management strategies today.

One of these new reports, The Canadian Consumer Tax Index, 2019 Edition released by the Fraser Institute earlier this month shows that the average Canadian household paid almost $40,000 in tax in 2018, or nearly 44% of their total income. The report also shows that the average family’s total tax burden is greater than what they spent on basic costs of living, including housing, clothing, and food, which came in at $32,000.

Heading into a potential economic downturn makes this an even greater concern for two key reasons:

1. Canadians are already struggling to afford household basics and manage debt – a May 2019 Angus Reid Survey showed that 33% of Canadians are having a hard time financially keeping up, particularly following recent gas price increases. It’s a continuing trend, as an October 2018 report by the Financial Planning Standards Council indicated that 33% would fail a “financial stress test,” and face hardship should a significant unexpected expense arise. An Ipsos report from one year prior said than an unexpected expense of as little as $200 could create this situation for more than half of Canadians. Plus, they are struggling to pay down debt, too — 20% rarely (if ever) pay off their credit card balance at the end of the month.

2. The tax burden of Canadians continues to rise –The Canadian Consumer Tax Index shows that Canadians are increasingly paying more and more tax. Between 1961 and 2018, the average tax burden (for all types of tax) has increased by 2,246%, and it hasn’t always been the case that taxes paid outnumber money spent on basic necessities. In 1961, 33.5% of a family’s net income went to tax, while 56.5% went to costs of living.

How can you increase your understanding of key tax issues to help your clients remain resilient in any economic climate? It’s a topic that will be broadly discussed at DAC this November.

• Understand the tax matters impacting benefits and investments – according to Dan Collison, who will be speaking at the 2019 Distinguished Advisor Conference , 58% of Canadian investors would leave their financial advisors if they could find one that could explain the taxation on investment income better. In other sessions, Kristin Ramlal will touch on stock option benefit considerations, and Mark Taucar and Jean-Pierre Laporte will focus on creating income in personal pension plans.
• Help clients manage a key enemy: debt - with debt to disposable income ratios holding steady at 1.77 Canadians continue to be heavily burdened. Many families are just a couple of hundred dollars away from financial ruin should unanticipated black swan events hit their finances. Yet, most of these same families are unaware of a powerful antidote: the efficient use of both debt and savings accounts to ward off financial threats. Learn the important role you play in this from Lysa Fitzgerald, AVP, Business, Private Banking & Trust, and Patrick Gill, Regional Vice President of Central and Atlantic Canada at Manulife Bank, one of our DAC 2019 sponsors.
• Manage the tax risks small businesses face - this is a critical element of future economic success as close to 45% of the Canadian workforce now in business for themselves, building an important element of Canada’s new economy. But recent tax changes, make it harder for businesses to thrive. Dan Kelly, President of the CFIB will help teach you to provide the financial advice businesses need to insulate their income and assets from heavy-handed governments.
• Canadians have more interests abroad - both in doing business cross-border, and in living or studying abroad, there are unique tax requirements that must be addressed. Learn what you need to know to help keep clients above-board with taxes on any side of the border in riveting sessions from speakers Tony Mahabir and Dr. Dean Smith.

Tax is the greatest eroder of wealth. When you incorporate knowledge of taxation and tax-efficient strategy into your practice, you’re bringing value that your clients not only want, but need.

For more information on the DAC 2019 speakers, agenda, and sponsors, download your copy of our DAC Special Report Catalogue and visit the 2019 Distinguished Advisor Conference page on our website.

Additional educational resources : Expand on your knowledge of business tax issues and hone up your credentials before year-end by taking advantage of a special offer until August 31, 2019. Enrol in the MFA™-Business Services Specialist Designation and pay only $195 more to come to the Fall CE Summits. Call 1-866-953-4769 to register.

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