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How much Taxes are You Willing to Pay ?

Guest post by: Patrick Bailey

Article Overview: Historically, taxes have been around, in some form or other, for centuries. Today, although we hate paying taxes, we accept them as a part of life. In some cases we even welcome new taxes, if we believe it to be a lesser evil to the alternative. The purpose of this article and future articles is to educate the reader about the tax system and the many ways that it can be used to your advantage in creating wealth while paying only your fair share of taxes.

How much Taxes are You Willing to Pay ?



Are you paying your fair share of taxes? Is your Income Tax system fair?

Do you know? Do you care?

If ever there is a subject which gets the average working man or woman’s attention, it is taxes. Taxes, taxes, taxes. There hardly a week when I don’t hear of some tax related topic. One way or the other we pay. When we earn and when we spend.

The funny thing about it is that while many people, I’ve met, know how important income taxes are yet they seem to care very little about their taxes or how the tax system works. In most cases the average taxpayer is only concerned with the bottom line.

Do I have to pay? Do I get a refund? How much?



Did you know that there are still taxpayers out there who don’t file on time because they expect a refund? They falsely think that since they don’t owe the government then they can file at any time without penalty.



Sadly, not only could they be breaking the law, they are also leaving their money in the hands of the tax man, interest free.

The average tax refund over the past 3 years has been $1400? That’s a tax free loan to the government of money which we over paid. How much could you do with an extra $100 each month?

“If you are not interested in your own money, then somebody else is and will use it for free.”

First, let’s get a brief overview of how the tax system has evolved over the years.

Prior to World War I, in 1917, the Canadian government collected 80% of its revenue from excise and customs taxes with the rest being generated by issuing debt, like bonds, Taxes on income was introduced as a temporary measure to help finance the war effort..

Today excise and customs taxes make up only 4% of total tax revenues while income taxes now generates 79% of total tax revenues. The remainder is comprised of goods and services tax, employment insurance premiums, foreign exchange and various program revenues.

The three main sources of income taxes are personal, corporate and non- resident taxes of which personal taxes account for more than 75%

According to the annual financial report of the government of Canada from 2006 personal taxes have risen from 72% to 76% in 2009, corporate taxes declined from 24% to 19% over the same period while non resident taxes made up the rest.

Income taxes have become huge cash cows for governments of all political stripes and a major drain on wealth creation for individuals. Along with interest, it is one of the biggest obstacles to creating, building and protecting your wealth.

Most people are employed by someone, so taxes are deducted at source which reduces their cash flow. Regardless of your income bracket you have less money to invest and to live off and as your income increases; you lose a larger amount to taxes at source. You don’t even see it, but over time you certainly feel the ill effects.

Similarly the first portion of most loan payments goes to interest thus reducing cash flow and the creation of equity.

One of the pillars of sound tax planning and wealth creation is to PAY YOURSELF FIRST. Income taxes and interest prevent us from paying ourselves first

The good news is that

1. We have a legal right to arrange our affairs so as to pay as little taxes as possible
2. We can learn how to pay less tax while we build our wealth

So how do we turn things around in our favour?

The first place to start is to examine our current sources of income and learn how different sources of income are taxed.

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Article Tags: centuries, creating wealth, fair share, lesser evil, paying taxes



Related Forum Posts
hiring an employee - You may want to consider contracting out instead of actually hiring. Some factors to think about if you hire someone as an employee and you put them on payroll you will be required to pay CPP and EI, as well as deducting CPP, EI and Taxes from their paycheck and remitting them to Revenue Canada. So you will need to 1. Register with Revenue Canada so you can make the remittenances 2. make sure you keep really good track of these deductions 3. it you don't have the time to do payroll you may need to hire a bookkeeper. or you could contract out the hours that you would need an assistant. The would be able to work from their space or your office. There is another option that you might want to consider some of the community centers offers training programs for new immigrants or anyone wish to change professions some of these programs require that they offer their services for 6 or 8 weeks (no charge to the employer). If you need someone short term this may help you and provide extra training for someone else. Microskills is one of the Community Centers that offer such programs. they train customer service personal, bookkeepers.
How to valuate a business - Hi Garth - here is how we did it at Northern Crown Capital when I was helping them raise venture capital for Toronto-based entrepreneurs. Assume the start date is 2003 so 2008 projections are 5 years out: How Northern Crown Capital Valuates a Business 2008 Financial Projections Earnings Before Tax $5,865,000 Tax Rate 42% Taxes $2,463,300 Net Earnings $3,401,700 Amount Seeking to Raise Today $3,500,000 Discounted Value of Future Opportunity, 5 Years Out 2008 P/E Ratio 15 Value of Company in 2008 $51,025,500 Discount Rate Applied 30% Year 2008 $51,025,500 Year 2007 $35,717,850 Year 2006 $25,002,495 Year 2005 $17,501,747 Year 2004 $12,251,223 Value of Company at Investment in 2003 $12,251,223 Less: Investment Amount $3,500,000 Present Value $8,751,223 Discount for Risk & Private Company 40% Less: Discount for Risk & Private Company $3,500,489 Private Company Value $5,250,734 Present Value (What the Owner Keeps) $5,250,734 60.00% Financing (What the Investor Gets) $3,500,000 40.00% Total $8,750,734 100.00% I hope this helps!


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