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Monday, September 1, 2014

Why Bother to Cheat on Your Taxes?

Posted by Dave on August 16, 2011

This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any.  Dave is from Ontario and is working towards his CGA certification.

Over the past few years, I would have to say that my fiscal and political views have definitely taken on a more libertarian flavour.  I see waste and inefficiency in government that just makes me angry.  We have people in office that don’t seem to understand (in my opinion) that running deficit budgets for years at a time is probably not the best way to do things, especially since they leave the repayment of the accumulated debt to the next generation or next party to get into office who starts the whole thing over again…..

But I digress (please read the disclaimer  on the bottom far right sidebar, my views probably don’t reflect Tim’s at all, who owns the blog) even though I don’t agree with how most of the revenue is brought in, I will not (purposefully, I may by accident) cheat on my taxes.  In the several taxation courses I have taken on-route to a CGA designation, I have realized that it really just isn’t worth it.

There are many, many ways that an individual can cheat on their taxes – they can decrease their level of income, Increase the amount of expenses claimed, a person can hold onto money that should have been remitted as sales tax, or claim credits that they shouldn’t have.  An interesting site (if you’re into that kind of thing) to read about tax convictions on Canada Revenue Agency’s convictions page,which gives details of larger convictions and the reasons why they occurred.

I have come to realize that if I wish to live in this country (which I do), I need follow the tax laws as prescribed.  It’s not something I enjoy doing by any means, but rather then grumble about it, or try to cheat to get around paying them, I attempt to pay what I’m supposed to and keep good enough records that if I’m questioned on anything I would be able to explain what I did.  I never want to be in a situation where I have the CRA auditing me over my past 5 year’s worth of filings and knowing that I owe a substantial amount of money.  From a personal finance perspective, this would probably clean out my savings and set back my plans significantly, which is far from ideal.

What I don’t think most people realize (especially those cheating on their taxes) is that they have a choice – if they don’t agree with how things are working here, they can go somewhere else with a more favourable system.  Most people will not, and will continue to grumble and cheat and then wonder why they have to pay $84,547 in taxes and penalties (an example from the CRA site).  I know of several people who actively sneer at the government and continuously cheat on their taxes – I just wouldn’t want to take the risk a few years down the road via a random audit.  I figure if they don’t like the way things are running here, nobody is forcing these cheaters to stay in Canada.

What’s your stance on taxes?  How do you try to minimize the amount paid?  Would you consider moving due to your country’s taxes?

Comments

9 Responses to “Why Bother to Cheat on Your Taxes?”
  1. Tara C says:

    Taxes are inevitable, and they’re bad everywhere, so why move? My options are Europe, USA and Canada – Europe’s taxes are not low, and USA taxes you get very little services for what you pay, so no point.

    I reduce my current taxes by contributing the maximum to tax-sheltered accounts (RRSP) and TFSA (to reduce future taxes).

  2. I do my taxes as honestly as possible, even if I feel ripped off. That’s why I try and use the system as much as possible. Instead of earning interest on my money, I earn dividends from Canadian Companies so I pay less taxes. I max out my TFSA every year.

    I have my taxes reduced each pay check with RRSP contributions already deducted. I think people are boneheaded to pay extra tax on each check just so they get a big tax refund at the end of the year. Banks don’t lend out money for free, so why should you?

    I also try my hardest to owe the Government $1.99 in taxes each year so that their $2.00 leeway policy bites them in the ass.

  3. Robert says:

    I don’t cheat on my taxes. In the same vein, I try not to steal anything. The reason isn’t as practical as “I might get caught,” but it’s not as noble as “I don’t do anything evil.” It’s because only poor people need to steal (and cheat) and I’m not a poor person. I think “being rich” is mostly a mindset of having enough (or more than enough) and that’s the mindset I want. I don’t have unlimited buying power, but I don’t have so little that I need to steal. So I don’t cheat on my taxes.

    Two years ago, I used RRSPs, charitable contributions and flow-through shares to pay under 10% taxes. Last year, I paid closer to 25% tax (which is pretty average I think). It was painful, but as others have pointed out, I get services that I appreciate in return. I send my kids to good schools, I take the kids to the library every week and I try to get them to a park or playground a few times a week. And fortunately, if we ever get sick, we have access to health care. Despite government waste and mismanagement, I think we’re pretty well off.

  4. diharv says:

    Tax avoidance is not equal to tax evasion. While there are many strategies for both , one is legal and the other is not. I think it is more prudent to follow the legal option.

  5. Canadian Dream says:

    I agree you should pay as little tax as legally possible and that is everyone’s job to do that…after all that leaves more money for retirement dreams *grin*.

    Yet cheating seems like a waste of time and effort. When the CRA can come back on your butt for anything in the last seven years there really isn’t a point of trying since when you do get caught your bill is going to be huge.

    So I agree with Dave on that, but leaving the country…not sure if there is a point. Taxes are largely the same around the world except the US which is still in denial that they need more tax. Heck even Warren Buffett thinks so (http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=2)

    Tim

  6. MikeworX says:

    “Taxes are largely the same around the world”

    That’s just not true. Do your research. Canada’s tax rates are among the highest in the world. To say everyone is in the same boat is just incorrect. There are many many options available for the individual/family that says they have had enough with the system.

  7. JM says:

    It’s true that Canada has high taxes in comparison to other parts of the world. However, if you take a look against any “Quality of Life Indexes” or “Best Countries/Cities to Live”, you’ll notice that the top ranking countries also have the highest taxes as well.

    Canada is usually in the top 5-10 and US is usually 10-20 range.

  8. Mike says:

    Yes but we were talking taxes and now you are adding in “standard of living”. There are people paying high taxes in Canada with a very poor standard of living and people living in other countries with low taxation with a very high standard of living.

    It all depends on context. But do NOT believe those that say that Canada has the best standard of living because of taxes. You make your standard of living. Canada does not make it.

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