Thursday, January 29, 2009

Homeowner tax credit could nab tax cheats

Boutique tax cuts are inferior to broad-based tax cuts. They complicate the tax system and have minimal impact. This said, the $1,350 limited time tax credit offered in the Federal Budget may catch some tax cheats. In 2005, CBC reported that the Federal government caught $650 million of tax cheating due to cash-only construction, adding, "Canada has 266,000 construction businesses with total annual revenues of $135 billion. Most have fewer than 10 workers."

Similar principles apply to the Active Families Benefit in Saskatchewan which credits the parents of children in sports or music programs up to $150 per child each year. Although Minister Christine Tell admitted in a TV interview in 2008 that these tax credits are too small to change behaviour, it may still mean more receipts from music teachers. It is not uncommon for such teachers to operate on a cash basis and don't declare income. Ironically, some even play for symponies that enjoy generous taxpayer funding.

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