I’m a greying tail-end Generation X’er firmly in middle age. Many in my cohort are married with kids with mortgages to pay off. They have built a life and community here in Canada. They go to work during the week and rush to get dinner on the table and whisk their kids off to recreational activities. They can’t just pick up and move, at least not easily.
So when they read recent headlines like, “Canadians paying more in taxes than on necessities: Report“, they shrug their shoulders and march off to the office to put in another days work. After all, beyond voting in the next election or perhaps signing a petition, there isn’t much they can do about it. Their “roots” in Canada have grown deep with age and they’re not picking up and relocating at this stage in life.
Canadians Pay more in Taxes than Necessities
According to a recent study, last year the average family in Canada spent more of its income on all forms of taxation (43%) than on basic necessities, such as food, shelter and clothing combined (35.6%). Shocking and utterly gutting. Canadians are increasingly feeling like they are working for the government via taxation and less for themselves and their families.
The academic study from the Vancouver-based fiscal think tank notes (quoted directly from the summary provided by the authors of the study):
- The Canadian Consumer Tax Index tracks the total tax bill of the average Canadian family from 1961 to 2023. Including all types of taxes, that bill has increased by 2,705% since 1961.
- Taxes have grown much more rapidly than any other single expenditure for the average Canadian family: expenditures on shelter increased by 2,006%, food by 901%, and clothing by 478% from 1961 to 2023.
- The 2,705% increase in the tax bill has also greatly outpaced the increase in the Consumer Price Index (901%), which measures the average price that consumers pay for food, shelter, clothing, transportation, health and personal care, education, and other items.
- The average Canadian family now spends more of its income on taxes (43.0%) than it does on basic necessities such as food, shelter, and clothing combined (35.6%). By comparison, 33.5% of the average family’s income went to pay taxes in 1961 while 56.5% went to basic necessities.
- In 2023, the average Canadian family earned an income of $109,235 and paid total taxes equaling $46,988 (43.0%). In 1961, the average family had an income of $5,000 and paid a total tax bill of $1,675 (33.5%). [Emphasis added].
This study has prompted a range of responses online bemoaning this reality. According to Shopify co-founder Harley Finkelstein, “This isn’t the way”. I couldn’t agree more.
Others feel like fellow Canadians are being fleeced by the government. It sure feels like that!
Escaping Canada’s High Taxes
While it may be too late for many Gen X’ers and Millennials, for those Gen Y and Z cohort members, this is your wake up call. You’re young enough that you’re still in high school or at post-secondary university or college. Or perhaps you just started a full-time job. You’re not married. You rent. You have no kids.
In other words, you’re not tied down with the constraints of older Canadians who have families and mortgage payments. You have a lot of flexibility. The development of online work and in particular, remote work post-COVID, coupled with solid Internet speeds and connectivity around the world, you can now work from anywhere and geo-arbitrage by earning high value currency (like USD) while living in a low cost jurisdiction in places like Latin America.
Flexibility affords you the ability to escape Canada’s high tax hell because as a non-resident of Canada, your non-Canadian sourced income is not subject to taxation in Canada (As a non-resident of Canada, you pay tax on income you receive from sources in Canada).
Sorry my American friends. The United States uses citizenship-based taxation, rather than residence-based taxation, meaning US citizens are taxed on their worldwide income regardless of where they live and where the income was earned.
Determining your Residency Status for Income Tax Purposes
Under the Canadian income tax system, your income tax obligations to Canada are based on your residency status. You need to know your residency status before you can know what your tax responsibilities and filing requirements to Canada are.
To determine your residency status, all of the relevant facts in your personal sitution must be considered, including residential ties with Canada and the length of time, purpose, intent and continuity of the stay while living inside and outside Canada.
You can look into determining your residency status as a Canadian on this Government of Canada website.
For those interested in enhancing their individual sovereignty and increasing their freedom, both economically and as a lifestyle, I encourage you to check out The Freedom Files.
This is not tax advice (actually nothing on this website is) so do your own research and speak to a tax advisor.
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