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10 The Canadian Statesman, Bowmanville, Wednesday, July 20,1994 Section Two Is Proposed Value-Added Tax Just a Warmed-Over GST? Dead On Arrival By Paul Pagnuelo During last fall's federal election campaign,, Prime Minister Chretien promised to "scrap the GST." Smart move. The federal Tories who introduced introduced the hated tax netted a mere 2 seats compared to the Liberals 176. No contest. The Liberal's campaign Red Book avoided mentioning what would replace replace the GST in order to maintain its $ 15-billion in net government revenue. revenue. Voters didn't care; anything was better than the GST. So in order to fulfil their election promise the House of Commons Finance Finance Committee was told to recommend recommend a replacement for the tax. On June 20th their report was released. The committee recommends replacing replacing the Goods and Services Tax (GST) with a National Value Added Tax (NVAT). But is this really a change, or is it just a warmed-over version of the GST? The primary recommendation is to reach agreement with the provinces to meld nine provincial sales tax regimes regimes and the federal GST under one INDEPENDENT FINANCIAL ADVICE! MYTH - All Mutual Funds invest in the stock market. WRONG - Stocks, Bonds, T-Bills, Mortgages, Foreign Equities, etc. With over 700 Mutual Funds on the market where would you to go find the one that suits you? REGAL CAPITAL PLANNERS LTD. Call Steve Scatterty Financial Advisor, Bowmanville 623-1936 TRAVELLING THIS SUMMER? DON'T FORGET TO BUY INSURANCE By Dennis Beere Manager, Bowmanville Branch Toronto Dominion Bank Would you have adequate medical coverage if you required emergency medical treatment while on your vacation? With recent cuts to provincial, out-of-country medical coverage, reviewing your coverage is a must before leaving on vacation. Start by determining how much coverage you have through your or your spouse's employer and whether you have coverage through any of your credit cards. This benefit is being discontinued on some credit cards, so if you think you have coverage, make sure it is still in effect. In most instances, travel insurance must be purchased prior to leaving the country or the province. Some plans allow you to extend your coverage, if necessary, while on your vacation if you have not incurred a claim on the original insurance certificate. Premiums for travel insurance are based on several variables such as your age, the number of people travelling, the length of the trip, the extent of coverage desired (ie. basic or deluxe), and your current state of health. A minimum premium payment is usually required. In addition to hospital and medical coverage, some travel insurance plans cover various other services, such as: - pre-trip travel information about the passport and visa regulations as well as the vaccination requirements for your destination - toll-free telephone number for emergency assistance while you are away - hotel and meal coverage for extended stays caused by a medical emergency - emergency transfer of cash from your credit cards - assistance in replacing lost travel documents - assistance in arranging for legal advice, bail or payment of legal fees There arc various conditions, limitations and exclusions attached to each "insurance carrier so make sure you read the policy carefully and buy the one which gives you the most benefit. Travel health insurance is offered by several companies and is easily accessible via the telephone if paying with a credit card, or at banks during their operating hours. As an alternative, TD Bank's "GrcenPlan" travel insurance can be paid for at any GrccnMachinc if you have a GrcenPlan brochure. For more information feel free to call TD's Green Infolinc at 1-800- 387-2092; The Toronto-Dominion Bank 39 Temperance Street Bowmanville, Ontario L1C 3K9 Tel: (905) 623-2514 Your Bank. Your Way. @ umbrella tax called the NVAT. The NVAT would apply to virtually all goods and services, including food, which would allow the rate to be lowered lowered somewhat from the current 7 percent. Filing requirements for small businesses would be simplified and the tax would be included in the price of goods and services. Cana^Tt/iion/ycomfry in the world to have more than one sales tax regime within its borders. Many of the recommendations make good sense. Broadening the base of taxable goods and services allows allows the tax rate to be lowered, makes the tax fairer and reduces collection collection costs. Having a single sales tax regime also makes a lot of sense. The Committee was repeatedly reminded reminded that Canada is the only country country in the world to have more than one sales tax regime within its borders, borders, let alone 10. But it appears unlikely that these changes will happen anytime soon. Jean Chretien recognizes the political political price he would pay for taxing, food and wheel chairs as part of his commitment to "scrap the GST". Furthermore, reaching a consensus consensus with the provinces on any issue will involve the Feds dealing with each province's shopping list of tradeoffs, which may very well create more problems than solutions. But regardless of harmonization Coalition Seeks Reforms in U.l. A coalition of nine major national business associations recently released released a report, entitled: "Canada's Unemployment Insurance Program: The Case for Reform," calling for a broad reform of the Unemployment Insurance (UI) program. The report proposes a number of reforms designed to make the UI program program more responsive to current and future conditions, encourage flexibility flexibility in the labour market and reduce the costs to employers and employees. employees. The report is significant in that, for the first time, an important group of the business community has come together to develop and endorse a broad set of fundamental principles for UI reform within the broader contest contest of the current social security reform reform process. The business coalition supports Minister of Human Resources Development, Development, Lloyd Axworthy's repeated statements that the Unemployment Insurance Program is in need of reform reform and must'provide a balance between between meeting the needs of the beneficiaries beneficiaries of UI and, at the same time, supporting the labour market and job creation. As stated in the report's conclusion, conclusion, the underlying issue is job creation creation and the enhancement of Canadian's Canadian's employability. The most important contribution that the proposed proposed UI reform can make is to produce produce significant cost savings for the program and premium reductions for employees and employers which in turn would be an incentive for hiring by the private sector. The reform must lead to the fundamental principle principle of an affordable, fiscally accountable accountable UI program that will help improve, improve, and not hinder, the performance of the labour market and the economy. The coalition regroups the Canadian Canadian Construction Association, the Canadian Canadian Federation of Independent Business, the Canadian Manufacturers Manufacturers Association, the Mining Association Association of Canada, the Canadian Pulp and Paper Association, the Canadian Restaurant and Foodscrvices Association, Association, the Federal Regulated Employ- crs-Transportation and Communication, Communication, the Retail Council of Canada, and the Tourism Industry Association of Canada. and base broadening, one recommendation recommendation of the Committee that must be rejected is to have the new tax included included in the sticker price of goods and services. Governments will be quick to explain how hiding the tax is of great benefit, but in truth the only beneficiaries are politicians who will have a much easier time raising the rate when consumers are less aware of how much they're paying. Visibility Visibility is a virtue in the application of taxes, taxes, and rather than being shelved the principle should be extended to all taxes. Plenty of alternatives exist to the current arrangement. In its own submission submission to the committee, the Canadian Canadian Taxpayers Federation recommended recommended disentangling the process by granting exclusive jurisdiction in tax fields to each level of government. So for instance, the provinces would be given exclusive right to levy either either sales tax or income tax and the federal government would be given the other. Despite some good recommendations, recommendations, the Committee's report is dead on arrival, as is Jean Chretien's commitment commitment to "scrap the GST" if he goes along with it. Even if implemented, implemented, there is little difference between between the GST and the proposed NVAT except in how it's applied and administered. But whatever the government ultimately does, the bottom bottom line is that it will get $15-billion out of our wallets - regardless of what the tax looks like in a bowl of alphabet soup. "Let's Talk Taxes" is a feature service of the Ontario Taxpayers Federation. by Brian Costello TAX FREE BENEFITS AT WORK While everybody is complaining about the level of taxation maybe they wouldn't have as much to complain about if they arranged for tax free benefits rather than always holding out for taxable income. In fact, in some cases benefits, even though they are taxable, are better than income. Beware though, as governments are now looking at more ways to tax benefits. The last federal budget for example changed a long standing benefit enjoyed by millions of employees. Companies used to be able to pay the premiums on employee insurance policies worth up to $25,000. Those premiums must now be treated as taxable benefits on our tax returns even though we don't actually get the cash. There are many benefits though that are still tax free. If you didn't need the money. If you were going to buy a similar benefit yourself anyway. If you could, get it cheaper through your employer rather than buying it yourself after you took your pay home. All these considerations would carry weight. However, I find too often that employees don't want benefits. They want a bigger pay cheque. Yet, they have to pay tax on that income and have much less purchasing power after the taxman has reaped his share. A classic example is an employer sponsored pension or deferred profit sharing plan. If you contribute to a registered retirement savings plan or a registered pension plan you get a tax deduction for the amount you contributed. However, if your employer matches the amount you contribute to an employer sponsored plan you get double the bang for your buck but with no taxable benefit. Many employees make the mistake of calculating whether they should contribute to a pension plan or an RRSP during the RRSP season. But, that's too late. While we get an extra sixty days after the year end to contribute to our RRSPs all monies must be in our registered pension plans before the year ends. With employers granting only small salary increases, many employees are using this route to get some extra cash out of them at the same time as some tax relief. They get a tax deduction for their contribution plus some tax free money out of their boss. One word of caution. It sounds nice to double your money in the first year. But, many RRSPs outperform pension plans in the long run. As a result, it pays to look at the past performance record of your company pension as compared to a mutual fund portfolio inside your RRSP. A second consideration has to do with the vesting requirements attached to your pension. If you aren't going to stay at this company for long you may not want to put any money into the plan at all. In that case you'd opt totally for an RRSP. Many companies will pay tuition fees for courses taken. If the course is for the employer's benefit you should not incur a taxable benefit. If you are obliged to wear a distinctive uniform and any special clothing like safety shoes and glasses it would be better to gét your employer to pay for them as you will not incur a taxable benefit. If you are disabled and in receipt of the disability tax credit your employer is allowed to provide attendant care so that you can work. Some would find it more beneficial to negotiate for that perk rather than a raise. In addition, they are allowed to provide reasonable taxi fares and other transportation expenses for those who are disabled. Speaking of transportation. Employers are allowed to reimburse us tax free for reasonable out of pocket expenses when we are on business. That can include worldwide travel or gas and parking when we are out running an errand for our employer. If your boss transfers you to another city, he or she can pick up your travel expenses without creating a tax liability for you. If you take a loss when you sell your house he or she can also reimburse you for that loss tax free. Maybe you should get your employer to pick up the cost of joining the golf club. It won't be a taxable benefit. Employers are also allowed to give us a variety of other useful perks like employee discounts on company items provided they are done within reason. They can also subsidize meals provided the employee pays a reasonable charge. And, many now offer employee counselling for self improvement, stress relief, sales tools, job retraining, even job placement, legal and financial planning. Employees should do their best to take advantage of as many of the perks available to them as possible as they get much more bang for their buck. Some employees have even been known to negotiate a pay ■Reduction in exchange for a substantial increase in perks. a