Finance WHAT TO DO ABOUT IT: monitor and seek professional advice It’s understandable that retirees and others want to know what to do about the above possibilities. Unfortunately, it is far too early to say what (if anything) you should do about them. As scary as some of the above tax changes may seem, it’s simply not wise to base present-day decisions on guesses about what Ottawa might or might not do. What if you sell a long-held asset proactively now, because you think that it’s a smart way to avoid a potential capital gains tax hike next year? If you’re wrong, you may end up paying a whole whack of tax which you would never have had to pay. Or, what if a subsequent government rolls back the tax hike a year or two later? If you’re concerned about the possible impact of tax changes on your portfolio, the best thing to do is to monitor the ongoing discussions and debate about proposed tax changes, and then talk to a qualified tax professional. A professional accountant or tax lawyer can do an honest and clear-headed assessment of howmuch of a risk these “what ifs” really are, and how they might affect you, given your personal financial situation. They can also plot a viable (and legal!) way to minimize your exposure to any new taxes that may come to pass. Always remember: taxes are only one part of any investment buying/ selling decision. Sure, you need to think about them and, sometimes, dealing with taxes requires additional advice or strategy that an accountant can provide. But taxes should rarely be the only reason you take a particular course of financial action. That’s especially true when it comes to speculation about taxes. Tax on registered accounts (RRSPs, RRIFs and TFSAs) Despite perceptions and rumours to the contrary, there are actually very few legitimate tax shelters available to Canadians. But some of them are of extreme importance to most snowbirds: the RRSP (and its close cousin, the RRIF) and the TFSA. Both of these investment accounts allow individuals to compound their savings free of tax as long as that money remains within the account. One way for the government to increase revenues might be to “tweak” how much tax is sheltered by these accounts. Perhaps by giving RRSP-holders less of a tax refund when they contribute to their account. Maybe by accelerating the rate at which RRIF-holders are forced to withdraw from their plans, or increasing the amount which they must withdraw in any one year. Or, perhaps, by changing the tax-free savings account to a “mostly tax-free” savings account, with a nominal tax charge upon withdrawal, or something similar. Are such changes likely?Well, anything is possible. But the political fallout of such changes would be swift and enormous, particularly for any government that tried to enact such changes without trying a lot of other strategies to raise revenues first. CSANews | SPRING 2021 | 27
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