The Tax Ottawa Doesn't Want You To Know About

[00:00:00]So, you want to leave Canada.

[00:00:02]You wouldn't be alone. There's an enormous list of people that are exiting this country because they cannot stand to live here any longer. And the problem is they're getting a giant surprise on their way out from your friend the CRA.

[00:00:19]I want you to imagine spending your entire life building something in this country, contributing to its economy.

[00:00:26]You work overtime. You take some risks.

[00:00:28]You start businesses that help people.

[00:00:30]You save. You invest in this country.

[00:00:33]You invest and you follow all the darn rules. And then one day, you decide, "Well, it's not paying me back in any way and cost of living is ridiculous.

[00:00:45]I'm out of here. I got to leave."

[00:00:47]Maybe housing is so unaffordable you can't do it. Maybe taxes are just too high. You're just sick of it. Maybe crime is rising in your neighborhood.

[00:00:55]You don't feel safe. Maybe you're simply retiring somewhere warmer and just want to get out of the cold. So, you go and you tell your friendly neighborhood government official that you're leaving.

[00:01:06]And Ottawa responds with an enormous bill. Not because you actually went and sold anything at all. Not because you made a withdrawal from all of your investments. Not because you took money off of the table. But because they decided, the CRA that is, to pretend that you sold those assets. Just pretend. Let's pretend you sold all of that because you're leaving. We're going to punish you. Sound ridiculous?

[00:01:31]Unfortunately, welcome to Canada's departure tax. And after a high-profile warning from author and Concordia professor Gad Saad, and I apologize if I mispronounced that, many Canadians are discovering this rule for the first time. The question isn't whether it's all legal. The question is whether it's even right at all to be charging Canadians when they decide to try and leave. Let's tap into the truth.

[00:01:59]>> Welcome to Bakes on Things.

[00:02:05]>> Welcome back to Tap the Maple here on Bakes on Things. I need you to do me a huge favor if you don't subscribe to this channel already. If you do watch this show most days of the week, you might actually lose access to the show very shortly since the liberals rammed through their online harms bills and YouTube may be forced to no longer recommend this show. Now, if you do subscribe to this channel, you do actually get the recommendations each and every day and if you hit the little bell, you get a notification. So, what I'm asking is that if you do enjoy this show and you want to keep seeing it in your daily recommendations, hit that subscribe button and that'll do it for you. Now, Gad Saad shocked many Canadians this week when he revealed that after meeting with this his accountant rather, he learned what it would cost him to actually exit this country.

[00:03:00]His reaction was probably the same as yours would be. He said he went absolutely numb. He was completely speechless. And if you've ever heard of Canada's departure tax before, you're probably wondering how leaving this country can trigger a tax bill in the first place, especially when you didn't sell anything. The answer lies in something called deemed disposition. If you've never heard that term before, that's government language for a legal fiction. Essentially, in plain English, Ottawa pretends that you sold all of your assets, certain assets anyway, the moment you decide that being Canadian and being a Canadian resident is no longer for you. You didn't actually go and sell those things at all, but for tax purposes, the government acts as though you did to discourage you from leaving. And then it calculates the tax bill to say, "Here's what you owe, should you sortie this country. Imagine buying a stock for $100,000.

[00:03:58]Years later, it's worth $500,000.

[00:04:02]Now, you still have it. You never sold it. You've never even touched any of those profits yet. But the moment you become a non-resident, Canada may in fact treat that unrealized gain as if it suddenly became a very much real gain.

[00:04:19]The government can call it a sale on paper, essentially. And then they turn that paper into a tax bill, which they send to you. The government's argument is pretty straightforward here as to why they think they can do this to you.

[00:04:34]Those gains accumulated while you lived in Canada, so therefore they should have their piece of your pie. You benefited from Canada's economic system after all.

[00:04:44]You benefited from Canada Canadian infrastructure and health care. You benefited from Canadian markets even.

[00:04:51]Therefore, Canada believes that it should collect a tax on those gains before you leave.

[00:04:58]That is the policy rationale for this.

[00:05:01]The problem is that many Canadians who are trying to leave this country right now do not see it that way and rightfully so. Because from their perspective, they're paying tax on money that they never actually received ever.

[00:05:16]It's still being held. And that distinction matters because it makes the bill huge and you unable to afford it.

[00:05:23]The story is fascinating because a departure tax isn't actually new. It's been around for decades. The Liberals have talked about making it bigger, but it's been around. So why is everybody suddenly asking about it? Because something has changed, that's why.

[00:05:37]Something dramatic has changed in Canada and it's 11 years of Liberals. More Canadians are considering getting out of this country now because of the way they have to live here. That is the real story, not this tax. There's housing affordability, there's cost of living, there's rising taxes, health care concerns, people getting sick and not doing well in hallways of emergency rooms, public safety concerns, and people being re-released into the city that have done horrible crimes, economic uncertainty including recessions.

[00:06:07]Whether you agree with any of those concerns of some Canadians or not, it doesn't really matter. The discussion is about leaving the country and that that is no longer rare. And that creates a very difficult question for all of us.

[00:06:20]If more people want to exit this country than ever before, what happens when they discover that the government has attached a potentially enormous financial cost for you doing so? Now, that is what we have to talk about and exactly what gets hit as well. See, most Canadians assume that it's going to be their houses first. And while they have looked at real estate taxes including home equity taxes in the past, usually it isn't real estate that's included.

[00:06:48]They're usually excluded for the most part in the exit taxation. Registered accounts like RRSPs, RIFs, and TFSAs are also generally exempt, although sometimes you might find some calculations in there about that. But non-registered investment portfolios, those are the things you're going to lose and you can be hit and hit hard.

[00:07:10]And it's not just stocks, it's ETFs, it's mutual funds. Even if you own private company shares in a Canadian company, you will be deemed to have divested them by leaving this country.

[00:07:23]It includes cryptocurrency as well, so don't think you're taking a shortcut there. Many of the assets people spend decades building can suddenly become part of the exit tax calculation. And that's where some departure tax bills become absolutely enormous and unaffordable. It actually becomes unaffordable to leave, especially if you were an entrepreneur here, especially for investors who invest regularly, especially for people who accumulated some kind of asset over many decades.

[00:07:51]The next question people ask is a simple one then.

[00:07:55]Can you get around it? Is there a way to go around all of these exit taxes? And the short answer is unfortunately usually no. Canada has spent decades closing most obvious loopholes. Transfer assets into a corporation for example, nice try there cubby, but the corporation shares can still be subject to departure taxes even when you do that. Oh, you have a new idea? You're going to transfer the assets to family members who still live here in Canada?

[00:08:23]Well, I'm sorry. That can trigger other tax consequences, too. The CRA has seen that before. Using complicated ownership structures to keep the CRA from sniffing out your trail? Good luck. The government has seen all of that before, as well. That's why respected tax professionals consistently give the same answer when you tell them you're out of here. There is no magic escape hatch from the departure taxation. There is planning.

[00:08:54]There is timing, of course. There are deferrals, in fact, that you can take advantage of, but there is rarely complete avoidance of those taxes. What many Canadians don't know is that CRA will and can allow security arrangements in certain departure circumstances.

[00:09:13]Instead of immediately paying a massive bill, a taxpayer may be able to post acceptable security, whatever that may be, and defer the payment. But it doesn't eliminate the tax. You're not getting rid of it. It simply changes when the tax is paid. The tax itself still exists, and the government still expects its money at some point in time.

[00:09:36]You're just putting up some security against having to pay it now. And this is where I think the bigger conversation actually has to begin, though. The departure tax itself isn't what bothers most Canadians. It is and it isn't because it's the context of the real issue here. Think about how many new taxes, surtaxes, reporting requirements, disclosure rules, and compliance obligations have been added just over the past Liberal decade. Think about the increasing focus on wealth taxation, for example, unless of course you hide all your money in the Caymans. Think about how often governments talk about fair share around here. Many Canadians feel they are being taxed from every single direction. Up, down, left, right, back, forward, doesn't matter. Income taxes, property taxes, sales taxes, fuel taxes, it's all there, it's all coming at you every single day. Think about it.

[00:10:32]Payroll taxes, capital gain taxes, taxes on your groceries, taxes here, taxes there, taxes everywhere. And now, if they leave, they get a departure tax, too. Whether that perception is fair or not, it is the perception that exists, and I truly do believe it is fair.

[00:10:51]Perception matters, too, because once productive people begin viewing success as something government targets rather than encourages in a country, they start looking elsewhere to live. That's why I believe the most important question isn't whether the departure tax should exist. I don't believe it should, but it's not whether it should or not. The most important question is why so many Canadians are suddenly interested in learning about it this year. That means a lot of us want to get out of here. If people are searching exit taxes in record numbers, perhaps the bigger problem isn't, in fact, the fact that the tax exists. Perhaps the The problem is that too many Canadians no longer feel optimistic about their future here in Canada. And if Ottawa wants to keep talent, investment, and entrepreneurship inside this country, making it expensive to leave may not exactly be the best idea. The better solution might be making people want to actually stay here. That's That's probably a good solution. Maybe fix the underlying problems because when citizens begin calculating the cost of leaving, the country should probably start asking itself why they are doing that in the first place. But that's not how a Liberal government works, is it? It's put a Band-Aid on the problem. Rather than create a solution that solves the underneath problem, here's a wound on your arm. We're going to slap a Band-Aid on it. Think of the grocery rebate, for example. Gives you 13 days on average of groceries. So, you've got a Band-Aid on it. It's covered the problem of the cost of groceries for 13 days. 13 days later, that Band-Aid starts to rot and fall off. And underneath it, because you didn't clean, you didn't change the Band-Aid, you didn't fix the underlying problem, putting some Polysporin on it, whatever the issue was, all of a sudden, the Band-Aid falls off, and you've got an infection. And that infection starts to spread up your arm and into other places in your body. That is Liberal governing. Rather than actually taking care of stitching that cut shut, or cleaning it, adding Polysporin to it, changing the Band-Aid every day, fixing the underlying issue, they just patch it and move on. Patch it and move on. And eventually, you get infected. And Canada's infected right now. And that's why people are trying to leave. And that's why they're getting exit taxes.

[00:13:15]So, the problem is not just the exit tax. The problem is that it's becoming newsworthy. And when it becomes newsworthy, the reason it becomes newsworthy is because it's not just Joe Schmo trying to leave this country. It's Joe Schmo and a hundred thousand others.

[00:13:31]That's how you tap into the truth. Don't forget to like, subscribe, join the conversation down below. Have you thought of leaving this country?

[00:13:38]Have you researched exit taxes before?

[00:13:41]Have you had a look at the departure taxation that happens in this country?

[00:13:46]It is well worth researching if you are considering leaving this country because boy oh boy could the bill be huge. And let's talk about any situations you've had, how you feel about this in general.

[00:13:58]Do you like the tax? Do you think it's fair? Do you think even if it is fair that there's another underlying problem of course with people wanting to get the heck out of here. That is a problem. I think it's a huge problem. So let's talk about it in the comments. Don't forget when you subscribe, that keeps us in your algorithm. So that may be the only way given some of the liberal ram through bills to do so. So please subscribe to keep us showing up every day in your list and obviously, obviously, if you have some hypes, hype it. I got told by somebody in the viewership that why don't you ever ask for hypes, Bakes? Other creators do that. I don't try not to ask for any accolades, but if you've got hypes, then hype it up. Let's do it. But uh otherwise, have yourselves a great Monday. We will see you at 6:00 a.m. Eastern Daylight Time Tuesday morning. Until then, enjoy your day. And don't exit without researching those taxes. See you tomorrow.