In this virulent economic paralysis in Quebec and elsewhere in Canada, here are four urgent steps that I would suggest the governments of Trudeau, Legault and co. to put in place immediately with a view to provide financial assistance to individuals finding themselves in lack of money to meet their basic needs.
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- Michel Girard was at the show Politically incorrect on QUB radio:
1. Cash advance RRSP
At the present time, if you withdraw money from your RRSP to meet the urgent need of cash, the withdrawal becomes taxable. During withdrawal, the financial institution will perform an initial withholding tax on the amount withdrawn, and during the production of your reports, you will need to pay the balance of tax (if applicable) based on your total taxable income.
I propose that the federal government, with the agreement of the provinces, allow savers to withdraw in 2020 up to $ 10,000 of their RRSPS, and that, without that financial institutions should retain a cent of federal and provincial income taxes. It would somehow enable us to make an advance temporary funds from our RRSP, without interest. But, the sum that is withdrawn must be repaid into the RRSP, it becomes taxable at maturity.
The term of repayment could be 10 years, according to the first of the following dates, or as soon as the reinvestment of money in the RRSP or at the end of the 10th year period.
It goes without saying that any new tax deduction will only be granted on contributions to RRSPS as long as the cash advance has been fully repaid.
The purpose of this temporary measure is to be able to tap into our retirement savings if you need money to weather the financial crisis due to the COVID-19. It is, in fact, put in place a sort of plan partially similar to the HBP (home buyers ‘ plan the property).
BUT THE TFSA BEFORE…
Before drawing on the RRSP, it will be preferable to withdraw the money from his TFSA account, if you have one.
The reason for this ? You can withdraw the money from our TFSA when you want it. There is no fiscal impact. Therefore you will have to pay any taxes on the amount withdrawn. Note that this is self-evident because unlike the RRSP, the TFSA does not provide any tax deduction.
Another important advantage of the TFSA : you can replace the amount withdrawn from the following year without detriment to our rights to contributions to a TFSA. Recall that the income within the TFSA will accumulate sheltered from tax.
2. Suspension of the QST and GST
For the next six months, I propose that the federal government, Quebec and the other provinces will suspend the sales tax on all products sold in drugstores, food markets and convenience stores.
Alone, the sales tax increase in Quebec and the price of our purchases of 15 per cent, or 5 per cent with the GST and 10 % (exactly 9, 975 %) with QST provincial.
Currently, only a portion of the products sold in pharmacies and food markets are exempt from sales taxes.
3. Cap interest expense
In view of the closure of the majority of enterprises, I propose that the federal government and the provinces in order to the banking institutions to immediately limit their interest charges to a maximum of 5 % on all personal loans, lines of credit and credit card balances.
The freezing of interest charges should cover a minimum period of six months.
4. Retroactive reduction of tax 2019
In order to allow taxpayers the benefit of financial flexibility in these difficult times, I propose that Quebec and Ottawa we place a retroactive reduction of taxes on the year 2019.
I would suggest reducing by 10% the tax bill on the portion of taxable income up to $ 70,000.
Such a retroactive reduction of income tax would allow taxpayers to average income to recover billions of dollars on the taxes payable in 2019 at the federal and the provinces.