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Toronto, Canada, December 9, 2015 – Paul Babber and Associates Ltd. (www.pbaltd.ca), a premier accounting and tax consultation firm in the Greater Toronto Area (GTA), comments on who will be affected most when the Liberal government enacts their planned tax changes.With Parliament fully resumed, it is expected that a tax bill in line with Prime Minister Justin Trudeau's campaign pledges will be introduced within the coming weeks.
"There are currently four main income tax brackets under the existing system," explains Paul Babber, the CEO and president of Paul Babber and Associates Ltd. "The middle income bracket—between $44,701 and $89,401—is expected to be the target of a rate reduction."
The current income tax rate on this segment is 22%. Under the Liberal plan, it would be reduced to 20.5%. Additionally, a new, fifth bracket of 33% will be added for anyone making over $200,000 per year (in addition to the current highest federal bracket, which is at 29% and affects those who earn more then $138,586 a year). In theory, the tax losses from the lower bracket will be offset by the higher one. (Source: Golembek, J., “How most Canadians will be left out in the cold by Trudeau’s proposed tax cut,” Financial Post, November 20, 2015; http://business.financialpost.com/personal-finance/how-most-canadians-will-be-left-out-in-the-cold-by-trudeaus-proposed-tax-cut.)
"Strictly speaking, however, making over $200,000 does not automatically mean the new bracket will be felt," observes Babber. "The way Canada's income tax is set up means that high earners will benefit from the reduced middle rate on part of their income. In order for the 33% rate to be felt, someone would need to make around $217,000 a year."
Of tax paying Canadians, over half—17.6 million, or 66%—will not see any benefit from the middle class bracket's reduction since they fall into the lowest income bracket, which is not undergoing changes.
"Who are left are the nine million Canadians making $45,000 or more per year and will see the benefits. Whether their gains can be offset by more taxes at the higher end remains to be seen," Babber notes. "The projected gains that Trudeau has been offering only work if high earners don't employ enough tax avoidance strategies."
For over 30 years, Paul Babber and Associates Ltd. has been providing personal and corporate tax assistance to residents of Richmond Hill and the GTA. More information about the firm’s work in accounting, bookkeeping, tax planning, and income tax management can be found at pbaltd.ca.
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Name: Paul Babber
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Organization: Paul Babber & Associates Ltd.
Address: Park Place Corporate Center, 15 Wertheim Court, Suite # 611, Richmond Hill, Ontario, L4B 3H7
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Website: http://pbaltd.ca/
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