HIGHER TAXES WON’T CAUSE EXODUS OF WEALTHY, SAY EXPERTS
So you’re a wealthy Canadian whose tax bill is going up. Does it pay to leave the country?
Media outlets reported last month that billionaire Murray Edwards is leaving Calgary for the U.K., with many seeing this as proof that tax hikes for top earners are driving away the rich. But, despite the political haymaking, the prominent oil patch financier didn’t publicly state why he decided to hop across the pond—the U.K. isn’t known for being a low-tax jurisdiction, but its rules for non-domiciled residents have typically been a draw for top earners.
Currently, with federal and provincial tax changes, the combined marginal tax rate for Albertans in the top bracket is rising to 48% in 2016, from 40.25% last year. Still, lawyer Jonathan Garbutt says top earners would be more likely to consider leaving if the rate tips past 50%.
Garbutt concedes the tax savings of moving from Canada to regions like the U.K. could be substantial enough to outweigh the higher cost of living. But, it doesn’t make sense to leave Canada solely for tax reasons, he adds.
Jack Courtney, vice-president of private client planning at Investors Group in Winnipeg, says there can be major upfront costs and tough logistical practicalities that negate any tax-saving rationale for leaving. “Very often, there’s a very big tax hit for severing residential ties with Canada.” Specifically, those leaving could get dinged on any capital gains from deemed dispositions of assets that have become more valuable.
Healthcare costs should also be considered, particularly for those older than age 65 and in retirement, says John Nicola, CEO of Nicola Wealth Management in Vancouver. “There tends to be, in my opinion, a lot more hype and press about people jumping ship offshore than there is data suggesting it’s a significant outcome.”