Search Blog
  • Alan Fustey
  • Becky Wong
  • Bert Griffin
  • Blair MacDougall
  • Blake Goldring
  • Brett Baughman
  • Camillo Lento
  • Chris Delaney
  • Cynthia Kett
  • Darren Long
  • Desmond Jordan
  • Don Shaughnessy
  • Doug Lamb
  • Ed Olkovich
  • Eva Sachs
  • Evelyn Jacks
  • Gail Bebee
  • Gerald Trites
  • Gordon Brock
  • Guy Conger
  • Guy Ward
  • Heather Phillips
  • Ian Burns
  • Ian R. Whiting
  • Ian Telfer
  • Jack Comeau
  • James Dean
  • James West
  • Jeffrey Lipton Fairmont Gloucester
  • Jim Ruta
  • Jim Yih
  • Joe White
  • Jonathan Chevreau
  • Kenneth Eng
  • Larry Weltman
  • Malvin Spooner
  • Mark Borkowski
  • Marty Gunderson
  • Michael Kavanagh
  • Monty Loree
  • Nick Papapanos
  • Norma Walton
  • Pat Bolland
  • Patrick O’Meara
  • Paul Brent
  • Peter Deeb
  • Peter Lantos
  • Riaz Mamdani
  • Richard Crenian
  • Richard Warke
  • Rick Atkinson
  • Rob Peers
  • Robert Bird
  • Robert Gignac
  • Sam Albanese
  • Stephane Ruah
  • Steve Nyvik
  • Steve Selengut
  • Tammy Johnston
  • Terry Cutler
  • Trade With Kavan
  • Trevor Parry
  • Trindent Consulting
  • Wayne Wile
  • Categories
    December 2012
    M T W T F S S
    « Nov   Jan »


    CPP Expansion: Inevitable

    Trevor Parry

    Finance Minister Jim Flaherty met with provincial premiers on Monday to discuss the Canada Pension Program. As the economy continues to move along at a sluggish pace, and more Canadians approach retirement it is not coincidental that the voices on the left wing of the political spectrum are calling for an expanded CPP. For most entrepreneurs and professionals the CPP is of no concern. They glibly discount the program saying that it won’t be there for them.

    Most actuaries believe that CPP will indeed survive the upcoming retirement of the baby boom generation, for it has not been plundered to the same degree that the great entitlement state, the USA, has done with its Social Security system. Entrepreneurs have often sought ways to opt out of the CPP. Up to this years budget an Employee Profit Sharing Plan could be used by the entrepreneur to re-characterize their income as T4PS which did not attract CPP contributions. Properly used, such as to avoid double contributions in the case of income splitting scenarios, the EPSP made a great deal of sense. Alas, some pushed the envelope using the structure for egregious income splitting strategies and not surprisingly Budget 2012 eliminated the use of EPSPs for connected employees.

    Many have turned to the “all dividend” compensation strategy to avoid CPP. Some pundits claim that the CPP is a tax and therefore all dividend is a savings strategy. This is sheer folly, for despite lackluster returns the CPP continues to be funded. The growing popularity of the all dividend strategy however promises the same result as that which met the EPSP. When the federal and provincial governments realize first how much tax revenue they are losing due to their lack of adherence to integration principals together with wholesale opt out of CPP by the entrepreneurial class the result will be the same; massive government response.

    We live in a day where a left wing policy agenda is gaining ascendency. Together with their friends in the media it will not be difficult for the “aggrieved” 99% to claim that the wealthy are opting out of the public programs dedicated to providing a degree of egalitarianism. Mr. Flaherty, despite his adherence to pro business policies is keenly aware that he must throw the howling mob something. If his next great policy battle is the needed curtailment of public service pensions how difficult will it be for him to first address the symbolic challenges of CPP contributions? The entrepreneurial classes, in their short sited action will undue much of the tax planning freedom they enjoy today. Under the guise of fairness the Department of Finance will seek to re-characterize income and become even more probing in their enquiry of private business matters.

    The business class in this country should be worried. A mob is growing at the gates and to continue to snub their noses at some of the sacred cows of the left will only engender a sharp and brutal over response.

    The MONEY® Network