Expect higher payroll taxes in 2012, taxpayers group says

OTTAWA—Canadians will see the biggest increase in payroll taxes in a decade next year, according to a Canadian Taxpayers Federation analysis of how many of your dollars will go to federal government coffers.

Employment insurance premiums will increase 5 cents per $100 of insurable earnings as of Jan. 1. That’s half of what the Conservative government originally planned but the analysis shows employees will still see a $53 jump to $840 in EI premiums in 2012

Combine that with the federal pension plan contributions and it means employees will have to give up a total of $3,147 in payroll taxes next year — an increase of about $142 over this year.

Employers will have to shell out about $164 more in payroll taxes next year, for a total of $3,483.

The combined net increase of 4.84 per cent is the highest since 2002.

“Finance Canada tells us that we should be thanking the government because they are not going to be raising payroll taxes as much as they promised,” said Derek Fildebrandt, national research director for the advocacy group.

A spokeswoman for the federal finance department suggested exactly that.

“The Canada Employment Insurance Financing Board is responsible for setting premium rates to ensure that the program just breaks even over time and managing a cash reserve — including adjustments in rates,” Suzanne Prebinski wrote in an email.

“However, to protect the economy and jobs, we cut any potential increases in half for 2012 — keeping EI premiums near their lowest level since 1982. This change is expected to save employers and employees $600 million in 2012.”

Prebinski noted there is no change to the Canada Pension Plan contribution rate, which has been at 9.9 per cent of pensionable earnings since 2003, but there will be an increase in the maximum contribution to account for inflation.

There will not be much change to personal income taxes, although Ontarians will once again lose out because the provincial rate of inflation is higher than the rate used to adjust the federal tax brackets.

“If you get a rate-of-inflation pay increase, you’re going effectively to be paying more income tax than you otherwise would,” said Fildebrandt, noting the federal tax brackets will be adjusted by 2.8 per cent, whereas the Ontario inflation rate is 3.3 per cent.

The Conservative government included a flurry of tax credits in the last federal budget that could bring a bit of relief to some Canadians.

For example, families with ailing relatives will be eligible for 15 per cent of the maximum $2,000 a year (up to $300) they can claim in expenses related to ill and dependent relatives. The government also removed the $10,000 limit on medical expenses for disabled dependants that are eligible for a 15 per cent tax credit.

Adults with children who share a home but are not married or in a common-law relationship — such as roommates or two sisters living in the same house — will now be able to claim separate child tax credits.

Parents will get a 15 per cent tax credit on up to $500 they spend on enrolling their children younger than 16 in artistic, cultural, recreational or developmental activity programs.

The tax credit — a maximum of $75 — must be used for membership or registration fees and not for equipment.

The Canadian Taxpayers Federation argues that tax credits are not as useful as income tax cuts and wants the government to scrap them in favour of letting people take more of their salaries home in the first place.

“We under no circumstances consider tax credits to be tax cuts,” Fildebrandt said. “They’re a form of expenditures simply meant to do one of two things: shape our behaviours and buy our votes . . . .”

Meanwhile, the corporate tax rate is going down to 15 per cent.

Fildebrandt said the taxpayers group supports the business tax cuts in order to make the system more competitive, but wishes personal income taxpayers would get some relief, too.

The new year will also bring more flexibility when it comes to retirement, as the next phase of changes to the Canada Pension Plan — meant to encourage people to retire later on in life — comes into effect.

All workers aged 60 to 64 will be required to continue making contributions to the CPP, even if they are already receiving a pension, and they will no longer have to stop working or reduce their salaries in order to start receiving benefits.

Those aged 65 to 69 will have the option to continue contributing to the CPP — to be matched by their employer — as a way to increase pension payments down the road.

If they do not want to contribute after they turn 65, they will need to give notice to their employers and the Canada Revenue Agency.

There are other tax changes worth noting, too.

Stamps will soon cost 2 cents more, with the price of mailing a basic letter within Canada rising to 61 cents on Jan. 16.

Elections Canada is increasing the annual limit for total contributions to any particular registered political party to $1,200 on Jan. 1. The same annual limit will now apply to contributions to any combination of candidates, nomination candidates and ridings of any one political party.

Original Article
Source: Star