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FEATURE ARTICLE
Perverse EMTR effect for some people
While it is true that a reduction in net income is
beneficial for many taxpayers, an increase can have
the opposite effect.
Imagine the same couple, who just received a
$1,000 raise each. Great news, right?
But look at the result of the boss's generosity: not
only are the Canada Child Tax Benefit, the Child
Assistance Payment, the GST credit, the work
premium and the solidarity tax credit reduced,
but many withholding taxes, such as contributions
to the Québec Pension Plan (QPP), employment
insurance and the Québec Parental Insurance Plan
(QPIP), increase.
The simulations carried out by the CQFF team
show that for some taxpayers, the EMTR can be
up to 80%!
That means that a $1,000 raise could represent only
$200 in the taxpayer's pocket!
The table below, which is taken from the CQFF
website, clearly illustrates how important it is to
take the EMTR into consideration.
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The added value of a financial planner
The financial planner's role is to help people develop a
plan that will lead to good financial decisions that help
them achieve their goals. Assessing and choosing
objectives and priorities are crucial aspects, but I have
always believed that our primary responsibility is to
improve our clients' financial knowledge.
Understanding the EMTR – or rather, the impact
of tax measures on RRSP contributions – is one
striking example of what financial planners can do
by using more than one financial planning area to
help their clients improve their understanding of
personal finances.
4 Tables showing 37 different situations can be found online at .
