My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Thursday, February 3, 2011

Should I Stay or Should I Go?

The recent press controversy surrounding the income tax hit related to Registered Retirement Income Funds (“RRIF”) seems to keep oozing issues. This week the Financial Post talked about severing your residency ties with Canada so that the income tax bite would be a one time only 25% withholding tax on your RRIF, as opposed to a 46% hit on each withdrawal (assuming you are a high rate taxpayer).

At the mid-market accounting firm where I am a tax partner, the majority of our corporate clients have substantial net worth and have the wherewithal and income tax incentive to leave Canada should they wish. Over the years we have had multiple discussions with people who are unhappy about their income tax bills and whom out of frustration ask about becoming non-residents. The same issue arises when we have discussions about Retirement Compensation Arrangements (“RCA”). Under a RCA, you essentially pay income tax at 46% upfront, but if you become a non-resident you only pay a 25% withholding tax, resulting in a net refund of 21%.

Out of all the discussions we have had about the non-residency issue, I cannot recall one client who has decided to leave the country so that they would only pay 25% on their RRIF or RCA. The reality in my opinion, which may be off base, is most Canadians value their family, health plan and lifestyle more then the do the almighty dollar, and the income tax tail does not wag the lifestyle dog.

When I was at Price Waterhouse and the net worth of many clients was extremely high, I did see some clients take up residency offshore for income tax reasons, and we have all read articles about those individuals over the years. To each his own, but those people remind me of athletes that have it all in their current city with adulation and comfort, and yet they bolt to another city for $14,000,000 a year instead of $11,000,000. When is enough, enough? But I guess that is a philosophical blog for another day.


I have been at many a cocktail party where some smart alec regales me with his/her story about their shoe box of records and how they torment their accountant every year. I usually shut them down by asking what kind of shoe box they have. They usually look at me quizzically and then I explain that unless they have a Berluti shoe box if they are male, or a Christian Louboutin shoebox if they are female, they probably cannot afford for me to prepare their tax returns.

Now you are probably wondering if I really say that, I can’t tell you, but I am The Blunt Bean Counter. Anyway, in all seriousness, I have been amazed over the years by how many people actually find it amusing that they torment their accountants by bringing in a shoe box at the last moment. I will not knowingly take on shoebox clients since I am doing a disservice to them and myself.

If you are one of those dreaded shoe box clients, I can only tell you that you are hurting yourself. The more disorganized you are, the better chance you have missed or misplaced you tax receipts/tax deductions, and the last thing accountants running around like chickens with their heads cut off in April want is a bunch of receipts to sort and add up. I would suggest your accountant, instead of using their energy to help you tax plan for future years based on your current return, will use their energy sorting receipts and have little or no energy left for the more important planning element.

Remember, if the shoe fits, wear it (check out the origin of this expression).

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.