Effective. Accessible. Responsive
Canada’s income tax system aspires to “neutrality” so that, in theory, an individual should be indifferent about whether he earns income directly or through a corporation. The CDA is one of the mechanisms employed to achieve this neutrality.
Subsection 171(1) of the Income Tax Act (Canada) (the Act) sets out the jurisdiction of the Tax Court in income tax appeals. In general, the subsection does not permit the Tax Court to review the process by which the Minister arrives at an assessment. Rather, the Tax Court is empowered to determine only whether the amount of tax assessed is correct. It appears that even the Charter of Rights does not change this position: see Burrows v. The Queen, 2005 TCC 761 (not yet available online).
For at least the last five or six years, an assortment of conspiracy theorists and their ilk have been trolling the Internet and spreading phony stories about the unlawful nature of Canada’s tax system (see, for example, the Usenet newsgroup can.taxes).
Jeff Manishen, a Hamilton lawyer who specializes in criminal law, wrote to me recently to ask some interesting questions about donations. Jeff sometimes negotiates arrangements under which clients can avoid prosecution by making a donation to a charity. Some charities, however, refuse to issue receipts for such donations. Is that right? My responses follow.
According to the Income Tax Act (Canada) (the “Act”), when computing paid-up capital (“PUC”) for tax purposes, one must begin with “an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act”.
What is PUC “computed without reference to the provisions of this Act”?