Income sprinkling rules for Canada are changing. Those doing income sprinkling (as a corporation sole) will pay more taxes. Complaining about it just lets the Government continue obfuscating the tax laws. This is because declining income sprinkling can lower taxes to zero. Until the Government tells Canadians how the tax laws really work, complaining about the proposed income sprinkling changes is futile and a waste of time. Otherwise, they are just toying with you, like an owner toying a cat with a piece of string.
Finance Minister Bill Morneau proposes amending Canada’s Income Tax Act (“ITA”) on income sprinkling. His proposal is, “Tax Planning Using Private Corporations”. It will increase small business and professional corporation taxes. His excuse? The changes are about “improving fairness in the tax system“. We say bull crap. They just want to collect more tax. Umm, how about wasting less of what you are already collecting?
“Improving fairness in the tax system?” We say bull crap
Income sprinkling means spreading income from a limited company (a corporation aggregate) among its family members. This results in less overall tax for the family. This is because Canada income tax is progressive. It means paying a higher percentage as income tax when you make more.
A progressive income tax is from the Communist Manifesto. So is abolishing private property. However, the Manifesto is not the basis for Canada’s legal system. So how can Canada have a progressive income tax that seems to steal your private property?
Our theory (Apu’s Theory) is income tax isn’t stealing your private property. It just seems it is.
Income tax isn’t stealing your private property. It just seems it is.
Common law-based countries are the former British Commonwealth. Biblical laws are the basis for common law principles. The Eighth Commandment says, “You shall not steal”. In Canada, theft is a Criminal Code offence. On July 1, 2017 the ITA started recognizing private person property. So how does Her Majesty get around this when levying an income tax through income sprinkling?
On July 1, 2017 the ITA started recognizing private person property
In law, legal persons can be human or non-human. Canadian law refers to humans (of legal age and sound mind) as private persons due to bijuralism. Corporations are non-human legal persons, or legal fictions. They can be a corporation aggregate or a corporation sole. Limited companies are the most popular kind of corporation aggregates. The corporation sole is relatively unknown. (A one-person limited company is different from a corporation sole).
A corporation sole is an office. An office, and the officer representing it, are conceptually divisible but legally indivisible. Therefore, legally speaking, a corporation sole is also an officer. An officer is a non-human legal person you choose to represent.
An officer is a corporation sole that you choose to represent
Officers surround us: police officers, Chief Executive Officers, and lawyers and judges (court officers). An officer acquires unique powers and duties from that office. Being an officer means acquiring (adding) a legal ‘layer’ of powers and duties.
The Meads versus Meads court case agrees. It says at paragraph 445:
“There is only one legal identity that attaches to a person. If a person wishes to add a legal ‘layer’ to themselves, then a corporation is the proper approach … the legal effect of that ‘layer’ is clearly established in common law and statute.” – Judge Rooke, Meads v. Meads
Judge Rooke gave this decision as a judge, as a court officer. Being such an officer gave him the legal power to render a court decision.
Judge Rooke says, “there is only one legal identity that attaches to a person.” This means when you are representing a corporation sole, such as an officer, you are then no longer a private person of full capacity.
Written laws, called statutes, is one way to create corporations. The ITA is a federal statute. Canada can amend the laws (i.e. amend the powers and duties) on corporation aggregate and corporation sole at any time. Therefore, the 75 day consultation period is a farce. The Government will just do whatever they want since both types of corporations are their legal creations. However, you can choose whether you want to represent either one.
The 75 day consultation period is a farce
Stealing private property is a Criminal Code offence. That is why the ITA deems you wanting to represent an ITA “office”. Canada’s Financial Administration Act says the income of that office is Canada’s “public money”. (This paper theorizes how CRA identifies the ITA “office”/”officer”).
That office’s income is not your private property as a private person. Income tax then is on Canada’s “public money” that you earn while representing a non-human legal person, an ITA “officer”. (Apu’s Theory concludes income tax could be an “office privilege access fee“.) This allows Canada to legally impose a progressive income tax. Being on a federal officer’s income also makes income tax constitutional. Taxing officers is nothing new. Officers were taxed 3,500 years ago.
Income tax is on Canada’s “public money” you earn as an ITA “officer” (aka a corporation sole)
From earlier, income sprinkling occurs when income from a corporation aggregate (limited company) is spread among family members who are consenting to work as non-human legal persons, as federal ITA “officers”, aka corporation soles.
Income sprinkling also occurs when the ITA allows income from two “federal spouses” (i.e. ITA “officers’) to be divvied up. One way is through the Canada Child Benefit (“CCB”). Canada pays CCB to the “federal spouse” (yes, recently CRA used this phrase in a proposal) receiving the lowest income as an ITA “officer”.
The Government proposes making the changes retroactive to July 15, 2017. However, common law principles do not allow laws being retroactive against private persons. In fact, around 1996, the Canadian Bar Association and the Canadian Institute of Chartered Accountants jointly wrote a letter to the Minister of Finance. They were complaining about tax laws being retroactive.
Apu’s Theory concludes Canada tax law is on corporations aggregate and on corporations sole. Both are non-human legal persons. Therefore, the proposed retroactive changes do not violate common-law principles against retroactive legislation on private persons. This is yet another example why we conclude the Department of Finance refuses teaching even tax professionals how the ITA really works. In short, the Government is toying with you, like an owner toying a cat with a piece of string. That is why alleged tax evaders are often found to be wilfully blind.
Instead of income sprinkling, what if those family members claim their pay as their private property? The tax laws then deems such income to be equal to zero. Taxes then are also zero. Is this because stealing a private person’s private property is a Criminal Code offence? Is this why Canada income tax is based on self-assessment, which CRA defines as voluntary compliance? Hmm.
However, this doesn’t mean the Government will let you do it. We gave examples earlier of why there is no rule of law in Canada. That is why we strongly suggest against declaring your paycheque as your private property. Instead, ask the Minister of Finance why they continue obfuscating how the ITA really works, and why they continue refusing to obey the rule of law. They are doing tax cheating. Until Canadians know how the ITA really works, complaining about the proposed income sprinkling changes is futile and a waste of time. Don’t be like a cat!