Raise the Hammer
I made the decision to incorporate for one reason and one reason only: to avoid taxes.
By Ben Bull
Published February 14, 2008
Let me tell you how it will be;
There's one for you, nineteen for me.-- Taxman, George Harrison.
Well, it's that time of year again: Tax time.
Unlike most years, I have an unfamiliar feeling when I consider my tax filing prospects this time around. I am actually not afraid.
Now why would that be? You may ask. Why would I not worry that Steven Harper and his cronies are going to bite me for a little extra cash as I sort through the remnants of last years overdue bills and titillate myself with the foreign holiday brochures I picked up on the way home?
Well it's quite simple, really; I'm a corporation.
18 months ago I started my own Company, "Ben Bull Incorporated". It's not much of an outfit really, just me and my laptop, a cheap printer and some marketing bunff - something about 'Leading Edge IT Security Expertise'.
I made the decision to incorporate for one reason and one reason only: to avoid taxes.
I had an inkling that something was amiss when I got a promotion and a pay rise a couple of years back and perused my first pay slip. Is it just me? I wondered as I studied the large numbers in the right hand column, or am I paying for everything?
UI contributions, CPP, Federal Income Tax - ouch. As I totted up the deductions I realized that I was losing almost 40 percent of my income to taxes.
That wasn't all. How much, I wondered, as I fueled up my van and bought my wife some cigarettes on the way home, of my net income goes into the tax coffers?
"That'll be 65 dollars and 23 cents," said the gas attendant handing me my receipt. I looked at it, and it didn't add up.
As I ran through the numbers one more time and worked out my net gain from my pay hike I realized, to my horror, that it was almost nothing.
As a result, I had no incentive to work harder and get ahead. Why should I bother? I asked myself. What do I get out of this deal except more responsibility?
So I quit. Not immediately of course - four kids and a mortgage tends to make you a little cautious - but, after a few months of building up my network and looking for my first assignment, I finally cut the cord.
As I built up my contacts and reveled in the prospect of not being beholden to the tax man every month (I filed once a year), I stumbled across an even better tax avoidance strategy: the write-off.
When I sat down with my tax man to prepare my first year's taxes I realized that I could pretty much write off, well - everything. I had no idea, however, how much my new corporate status would affect my bottom line until I filed my first year's taxes.
I had given my tax guy one simple instruction: Help me keep my money.
He did. When my first return was posted I realized I would be paying, proportionately, almost 10 percent less in taxes than I would have been as a regular employee. And yet, I was earning about 30 percent more.
"How can this be?" I asked my guy, as he handed me the return. "I thought corporations ran this country?"
"They do," he replied, shaking my hand as I stood up to leave. "They just don't pay for anything."
Over the next few visits, my accountant explained that he represented lots of small- and medium-sized companies and that they were all in the "tax avoidance business".
"Nobody wants to pay taxes," he explained. "You just have to know how to avoid them."
I wondered if he was a bit of a rogue. Perhaps he was bending the rules, just a little bit?
So I asked around.
I had built up a pretty sizable network of corporate buddies by this point. My friend Ken said I was paying too much.
"You should write off more," he suggested. "Tou're way too cautious."
Dave said I was "probably about right." Jeff drew me an elaborate flow diagram with thick arrows going this way and that and a dotted line directed at the little box in the corner labeled "IRS".
"I don't put much in there," he told me. "Taxes are for mugs."
I suppose I could also tell you about my ex-colleague Neil. The bloke who takes regular trips abroad with, "a little under 10k" hidden in his suitcase. His Cayman Island bank account where his money "will never be found".
But I won't. I might get him in trouble.
I'm not apologizing for my tax-evasive mentality. After all, the system is set up to discourage contributions - isn't it? What do I get for paying more? Nothing. The tax department offers me no incentives. Except perhaps, not going to prison.
Now if I sound cynical and ungrateful it's for one reason only: I am.
I've been involved in a fair amount of governmental work over the years and, consequently I've developed something of a hate-on for government departments.
Back in 2000 and something I was asked to help my company prepare a report into the IT process efficiency of a well-known government agency.
Six months later, as a watered down version of the report landed on the floor of the provincial legislature; I was ready to throw up.
Among the things we noted:
A moderately expensive independent and ill-advised consulting assignment quickly ballooned into something bigger. Something much bigger.
By the time the final bill was totted up the agency had forked out more than ten times the original work estimate, hundreds of millions of dollars.
"What did you get for this money?" we asked the contrite looking senior execs. "Not much" was their dispiriting reply.
An incidental scoot around the lunch room one morning, uncovered a number of semi-comatose employees, scrunched up on the sofas.
"Are they ill?" we asked our escort, as we tip toed past their heads.
"No," he replied, rolling his eyes and tutting, "they're sleeping."
Turns out we'd wandered into the 'nap room'...
As part of my corporate networking efforts these days I regularly hook up with ex-colleagues many of whom are immersed in the Government contract world. Each of them shake their heads at my corporate client list and tell me to "hurry up" and "get in on the action."
"It's a free ride," they tell me. "You need to get on board."
I met my ex-bank colleague Andrew for coffee one day a few months ago now. He gave me his agency's contact details and told me he was working "Two days a week for five days pay."
"Those guys just don't have a clue," he bragged.
Julie, an ex-desk mate from my audit days, explained how her department was "full to the brim" with consultants, some of whom have "been here as long as the furniture."
"They're not cheap," she complained, "and they don't do anything. It's such a waste."
Waste. We've all heard about the high cost of governmental "efficiency", but what gets done about it? Here in Toronto there is supposed to be an "Efficiency Task Force" at work to uncover our municipality's wasteful abundances. So far they've said nothing.
At the Federal level Sheila Fraser pops her head up every now and again, but if you're like me you probably suspect she's just chipping away at the remote end of the massive iceberg and wasting her time.
Gun Registry, anyone?
So - what is the solution for all this inefficiency? Well, I don't know. A few good scandals probably wouldn't hurt, but when you look at the farce that's going on over the Airbus affair, you have to wonder whether these investigations are themselves just another waste of taxpayer's money.
The optimists among us may point out that we have a pretty effective government overall. I've heard rumours that we don't compare too badly to other democracies around the world. But for me, well - I just don't have that context. The reality as I see it is that there is a lot of waste. A hell of a lot of waste.
If you want to know who's paying for it then allow me to suggest: it isn't me.
But I think it might be you.
(All names have been changed to protect the innocent and not-so-innocent.)
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