Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
In a care[...]
Canada’s Rising Tax Burden and Fintech Opportunities
Tax Burden | Aug 13, 2024
Image: Freepik
Canada's Growing Tax Burden on Consumer Spending and Opportunities for Fintechs
According to the Fraser Institute's 2024 Canadian Consumer Tax Index report, the average Canadian household now pays 43% of their income in taxes, which is more than the 35.6% that they spend on necessities. This is a worrying trend, and as a result disposable income (discretionary spending purchasing power) for most Canadian families is shrinking. While Kim Moody, founder of Moodys Private Client, highlights concerning stats from the report, about value for tax dollars, this article is aimed at encouraging fintechs and financial institutions to consider offering genuine value to assist consumers during these trying times.
See: Do employees pay less taxes by exercising stock options pre-IPO?
But first, here are 3 alarming stats from the report to chew on:
- “In 2023, the average Canadian family earned an income of $109,235 and paid in total taxes equalling $46,988”
- “This is a dramatic shift since 1961 when the average Canadian family spent much less of its income on taxes (33.5 per cent) than the basic necessities (56.5 per cent). Taxes have grown much more rapidly than any other single expenditure for the average Canadian family.”
- “Since 1961, the average Canadian family’s total tax bill has increased nominally by 2,705 per cent, dwarfing increases in annual housing costs (2,006 per cent), clothing (478 per cent) and food (901 per cent).”
Opportunities for Fintechs
1. Tax Optimization Solutions
Tax-efficient financial solutions are in higher demand as taxes take up a growing share of household income.
See: Tax-Free Bitcoin Zone Proposed by the USABTC
Financial institutions and fintechs can take advantage of this by creating products that reduce tax obligations, such as retirement planning resources, or software that makes it easier for individuals, families, and corporations to manage their tax obligations, and tax optimized investment portfolios.
2. Financial Literacy Education
As Canada's tax system has an increasing influence on household finances, it's more important than ever for the average Canadian to achieve a certain level of financial literacy. Fintech businesses are in a unique position to offer tools and educational materials to help customers manage and comprehend their tax obligations. Personalized financial advice, interactive calculators, and webinars can increase brand loyalty while also improving client engagement.
3. Cost Effective Financial Services
As discretionary income declines, its natural for customers to look for less expensive alternatives to traditional financial services. Fintech companies can help innovate by providing high-value, reasonably priced financial products to mass markets, bridging any gaps left by traditional institutions that typically find it difficult to provide competitive pricing. Consider solutions such as peer-to-peer lending platforms, digital banks with cheaper costs, or robo-advisory services.
Conclusion
The rising tax burden on Canadian families creates both obstacles and possibilities for fintech companies and financial institutions. By emphasizing tax-efficient products, improving financial literacy, and developing innovative services that are affordable (and not to forgot mentioning the need to push for policy changes).
See: Who Will Canada’s New 3% Digital Services Tax Impact?
It is imperative that industry participants continue to be flexible and attentive to the demands of their clientele.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
 |  |  |
Support NCFA by Following us on Twitter!Follow @NCFACanada  |
Related Posts
Trudeau and Chinese premier reveal progress, even without formal trade talks- Wealth One Bank: Canada’s Minister Orders 3 Founding Investors to Sell
- Financial Privacy: SEC Launches Enormous Database Compiling All Stock Trades
- Coinbase and Kraken Reaffirm Plans to Stay Operational in Canada Amidst Changing Regulatory Landscape
- 7 Written Sections To Include In A Legal Service Agreement
- Welcome to the third largest tech-hub in North America
Leave a Reply