The coronavirus pandemic is wreaking havoc on the worldwide economy. Countries are scrambling for funds and often look to their wealthiest residents for a way out of the financial mess.
Specifically, a wealth tax is seen as a solution by many Western countries. One of the latest countries to cry for a wealth tax is Canada. In fact, Canada may go even further and tax Canadians even when they are no longer residents in the country.
Canadians are in favor
A recent survey from Abacus Data indicated that large numbers of Canadians were in favor of a wealth tax. Surprisingly, this included households in the high income brackets.
Canadian residents from all walks of life were polled about a proposed 1% tax on Canadian residents with assets over $20 million – possibly every year.
Overall, 79% of the Canadians polled supported the idea, while 35% was strongly in favor of it. The idea also saw broad support (73%) among high net-worth Canadians.
‘The pandemic is making the rich even richer’
This timely poll is grist to the mill of activist group Canadians for Tax Fairness, which is lobbying for tax amendments and has found support by the federal NDP and Green Party.
Some of this may have to do with the media narrative that claims that even in the midst of the pandemic, the rich were getting richer. If there is any truth to that claim, it is only because of the spectacular stock or cryptocurrency markets.
Extraterritorial income tax
There is a possibility that Canada will go even further than the wealth tax and join its neighbors to the south in taxing income extraterritorially. No, we’re not talking about off-planet taxation, although it’s not far off!
Extraterritorial income tax means that the Canadian government can take a piece of your income even when you’re no longer a resident of the country.
Imagine moving to Malaysia to be in a vibrant start-up scene where foreign income isn’t taxed, and still having to pay tax to a government halfway across the world. That is what can happen if Canada pushes this idea through.
So what’s the solution?
Ironically, wealth taxes usually fail to bring the intended results. But as with many restrictive measures and law changes, there is hardly a way back. Only three Western European jurisdictions have succeeded in getting rid of their failed wealth taxes.
And likewise, an extraterritorial income tax makes no sense at all. Unfortunately, this is a headache our US expat friends are all too familiar with. Will Canadians soon suffer the same fate?
You guessed what the best solution is: renouncing your Canadian citizenship. There is a small selection of countries where citizenship directly or indirectly for sale, or can be achieved after a relatively short residency.
Consult us for international tax challenges
Tax issues can be a headache when they are not your day-to-day job. Laws are constantly being changed and can often be interpreted in different ways. That’s why you should always consult international tax experts before relocating.
But even if you already have emigrated, we can help. Whether you’re Canadian or Zimbabwean, get in touch for creative advice that is tailored to your personal situation.