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Top 1% paid slightly more in taxes after Liberal changes, figures show

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  • OTTAWA — The country’s top one per cent of earners paid a slightly bigger share of federal income taxes after a policy shift from the Trudeau Liberals designed to make the rich contribute more, according to new federal data.

    Having high income earners pay more, however, only appears to have materialized after efforts by some at the top to escape a bigger tax hit.

    The Liberals came to power in 2015 on a signature campaign pledge dubbed the “middle class tax cut,” a reduction they planned to pay for by raising taxes on the wealthiest Canadians. Starting in 2016, they lowered the tax rate on the middle income bracket and hiked taxes on all income earned above $200,000.

    With so many economic factors to consider, experts say the exact effects are hard to pin down — especially since there is evidence many high earners moved income forward to the 2015 tax year to take advantage of a lower tax rate.

    On Thursday, the Finance Department released 2017 figures showing the share of overall personal taxes paid by top earners that year was 25.1 per cent. It was an increase of 0.9 per cent compared to the 24.2 per cent share in 2014, which was the last full tax year before the Liberal measures were announced.

    The plan was unveiled in late 2015, but only took effect at the start of 2016, giving top earners time to shield their income. Because of this, a more fitting before-and-after look required a comparison of 2014 figures to those from 2017.

    A separate report released Thursday by the parliamentary budget office highlighted the late-2015 income movements and how the tax-planning efforts affected numbers for 2015 and 2016.

    The budget watchdog’s report estimated many top earners brought forward their income as part of behavioural changes that raised government tax revenues by $5.6 billion in 2015 and lowered them in 2016 by $3.2 billion.

    In addition to the tax planning, the Liberal changes on their own reduced income-tax revenues in 2016 by another $400 million, the report said. Combined, the tax increase on the highest earners fell short of fully offsetting the tax reduction for middle-income earners.

    Parliamentary budget officer Yves Giroux said in an interview Thursday that there was more income shifting than expected.

    “People in high income brackets, they can adjust their behaviour and they can adapt their tax-planning strategies according to changes in the tax system,” Giroux said.

    He said other factors blur the picture even more, like the natural growth of the economy, inflation and demographic changes.

    Jack Mintz, a tax policy expert at the University of Calgary, said it doesn’t look like the changes generated a lot more revenue from high earners after weighing other factors.

    “When you actually look at the total increase in revenues in personal tax for 2017, compared to 2014, allowing for some normal growth in the economy and inflation, it looks to me that they didn’t get a lot of money out of the rate hike,” Mintz said.

    The 2017 Finance Department numbers released Thursday show that 362,000 people — or 1.3 per cent of all tax filers — earned enough to reach the top bracket. In 2016, there were 326,000 people in the upper category, while in 2015 there were 356,000.

    Income above around $200,000 generated tax revenues of $31.5 billion in 2014 and $36 billion in 2015. The tax changes brought in $31.4 billion in 2016 and $36.7 billion in 2017.

    During the 2015 election campaign, the Liberals told voters the tax changes would be revenue-neutral. But a few weeks after taking office the newly installed Trudeau government said the plan would actually lower net revenues by $1.2 billion in each of the first five years.

    The new upper bracket was no longer expected to generated as much revenue, in part because experts predicted the biggest earners would make more of an effort to avoid taxes.

    At the time, the Liberals argued their tax-bracket tweaks would help the country’s weakened economy because middle earners were likely to spend what they save on income taxes.

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    Andy Blatchford, The Canadian Press

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    National

    Canada-China relations hit ‘rock bottom’ and at ‘freezing point’: Chinese envoy

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  • OTTAWA — China’s ambassador to Canada says the bilateral relationship is now at “rock bottom” compared to any time since diplomatic ties were first established decades ago.

    In prepared text for a speech Thursday, Lu Shaye said he’s saddened Canada-China relations are at what he called a “freezing point.”

    Lu’s remarks come at a time of heightened tensions following the December arrest of Chinese telecom executive Meng Wanzhou in Vancouver on an extradition request by the United States.

    The Huawei executive’s arrest has enraged China, which has since detained two Canadians on allegations of endangering Chinese national security, sentenced two Canadians to death for drug-related convictions and blocked key agricultural shipments.

    Lu did not mention Meng’s arrest — but he said the China-Canada relationship is now facing serious difficulties.

    He said China has long valued its relationship with Canada, particularly since it was one of the first Western countries to establish diplomatic ties with the Asian country.

    “For clear reasons, the current China-Canada relations are facing serious difficulties and are situated at the rock bottom since the two countries have established diplomatic relations,” said a copy of Lu’s speech, which was posted on the Chinese Embassy’s website.

    “It saddens us that the current China-Canada relations are ‘at a freezing point’ and face huge difficulties. The knots shall be untied by those who got them tied.”

    He continued by urging Canada to view China’s development in a “fair and objective” manner and to respect its concerns. Lu also warned Canada to “stop the moves that undermine the interests of China.”

    In recent months, Beijing’s envoy has used strong words when talking about the relationship. In January, he told Canadian journalists that Meng’s arrest was the “backstabbing” of a friend and said it was evidence of white supremacism.

    Lu also warned of repercussions if the federal government bars Huawei from selling equipment to build a Canadian 5G wireless network.

    He made the remarks in Toronto at an event hosted by the Globe and Mail. The document said former prime minister Jean Chretien was in attendance as was Darryl White, chief executive of BMO.

    The Canadian Press

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    Environment

    Keep guard up against hurricanes in 2019, as risk remains potent: forecaster

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  • HALIFAX — It has been years since a major tropical storm wreaked havoc in Canada, but the Canadian Hurricane Centre is warning against complacency.

    The U.S. National Oceanic and Atmospheric Administration released its hurricane outlook Thursday, predicting nine to 15 named storms this season, with four to eight becoming hurricanes and two to four being major hurricanes.

    Bob Robichaud of the Canadian centre noted that’s similar to last year’s hurricane season, when only two storms hit Canada, including post-tropical storm Chris, which made landfall in Newfoundland in July 2018.

    However, Robichaud warns that some Atlantic Canadians may be forgetting storms like post-tropical storm Arthur, which snapped trees and caused massive power outages in 2014, and hurricane Juan’s widespread wrath in 2003.

    And he reminded journalists attending a briefing in Halifax about hurricane Michael, which flattened parts of the Florida panhandle last October.

    The Halifax-based centre has created a fresh smart phone app, and recommends people begin tracking storms as soon as they start and then monitor for shifts in direction and intensity.

    “What we advocate is for people to really stay in tune with weather information because the forecast can change as the storms are approaching,” Robichaud said.

    Robichaud says studies show that complacency levels rise about seven years after a storm like hurricane Juan, and that as a result people do less to prepare.

    “People tend not to take any preparedness action if they haven’t had any kind of hurricane in recent years,” said Robichaud, a warning preparedness meteorologist.

    “For us it’s been five years since any major impactful storm … so it’s even more important to take the necessary precautions to get ready.”

    The Intact Centre on Climate Adaptation at the University of Waterloo has published a simple guide for Canadians on basic measures to take to prepare in particular for flood risk from extreme weather.

    The centre has repeatedly pointed out that without basic measures, basement flooding can cause tens of thousands of dollars in damage during hurricanes.

    Its publications include a Home Flood Protection Program that begin with such simple steps as testing sump pumps, cleaning out eaves troughs and maintaining backwater valves.

    More advanced measures include removing obstructions from basement drains and creating grading to move water away from homes.

    The hurricane season runs from June 1 to early November.

    Robichaud said hurricanes tend to “feed on” warmer waters, and as result the centre is closely monitoring those trends.

    The meteorologist said as summer progresses it’s projected the water will warm in the eastern Atlantic and become warmer than average.

    In addition, Robichaud said the Atlantic Ocean continues to be in an overall period of high hurricane activity that hasn’t yet come to the end of a cycle.

    — Follow (at)mtuttoncporg on Twitter.

    Michael Tutton, The Canadian Press

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