It is necessary to take advantage of the federal tax credit for GST that double

At the beginning of the crisis of the COVID-19, one of the first initiatives of Ottawa to support individuals has been to “double” the tax credit for the GST.

Wow ! Even those whose situation has not been affected by the events have been entitled to the candy. Many other measures have been announced since, so much so that we had almost forgotten that, until the money is deposited, two weeks ago.

“Forgotten “, probably not, since many of the people referred to were disappointed to receive less than the amount expected. Others, on the contrary, have had the surprise to get more than what they thought. Some who do not qualify for this credit in normal times, have been surprised to see a deposit of a few hundred in their account, without asking anything. They would be a million in this case for the country. How is it ?

The credit for the GST, what is it ?

A few words first on the functioning of the federal credit. It was implemented in 1991 at the same time that the GST in order to mitigate the effect of this new tax on the portfolio of low-income households.

The amount of the deduction varies depending on the number of persons who compose the household, and family income. Adults affect 290 $ (2019-2020), to which were added 153 $ per child. Single-parent families are entitled to a credit for the first child, or 290 $ instead of 153 $.

For all households, the aid begins to shrink when the family income is approaching 38 000 $. It then decreases gradually as the income increases, and eventually disappears.

Single persons with low income receive a particular treatment. For them, the credit is gradually improving, 290 $ 443 $ per year, when their income increases in the range of 9500 to $ 17 500 $. It is an incentive to work. A single person whose income reaches at $ 47,000 but there was more entitled to nothing.

Bonuses of 65 % to over 4000 %

When Ottawa began to unpack her presents financial in mid-march, he announced that he “doubled” the credit for the GST year by a single payment.

The federal government has not simply multiplied by two the amount of money that it déboursait already. Rather, it has raised its thresholds so that taxpayers get almost the double of what they received, ” observes Luc Godbout, holder of the research Chair in taxation and public finance from the University of Sherbrooke (CFFP).

“I don’t know why they did it like that, I do not know the computer systems at the federal, but it would be more easy to implement “, he thinks.

A graph that speaks

However, this method has caused significant distortions. The majority of taxpayers have received the double, but others have had less, while others, not so much. To understand, you need to take a look at the chart. It illustrates the tax credit for the GST paid to single people without children, before and after the subsidy.

It shows that single people with low incomes are far from seeing the financial aid double. At $ 17,000 of income, the credit of the single passes of $ 440 to $ 730 per year, approximately.

At the other end, people who were only 10 $ receive over $ 450. $ 47,000 of income, a household solo, which only hit anything suddenly gets 425 $ tax credit.

It is fun for him, but the other, who was less than promised may find it less funny.

Note : The amounts mentioned are those of the credit 2019-2020 based on the income of 2018.

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