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Kim G C Moody’s Musings – 1-1-1 Newsletter For July 9, 2025
One Comment About Taxation – The Departure of Successful Canadians is Real….and Canada Needs to Do Something About It
More and more successful Canadians are continuing to leave Canada. Many tax practitioners have been aware of this phenomenon for years. For example, in the first 23 years of my career, I worked on approximately a dozen tax cases involving Canadians leaving Canada. But the number of files that my colleagues and I have worked on in the past ten years has skyrocketed to almost one thousand.
Statistics Canada estimates the number of people coming into and leaving Canada. In 2015, 68,945 people permanently left Canada. The next year (the first of the “new” Liberal government), it was 97,473 – a staggering increase. In 2017, it increased again to 104,013. The COVID year of 2020 decreased such departures to a low of 60,407 but it has been increasing ever since. For 2024, the departures were a ten year high of 106,134 and the first quarter of 2025 is keeping up that pace with estimated departures of 27,086.
The problem with these statistics, however, is they are simply blunt numbers. They are estimates based upon statistical modelling and administrative proxies like inactive tax filings and health care de-registrations. In addition, the statistics don’t come with other useful information like how much wealth and recurring income has left Canada as a result of such departures. It also doesn’t track any private businesses that might be attached to such individuals that may have also left. Any loss of businesses usually comes with related Canadian job losses and that would be a useful statistic to track as well.
Why would I like to see those statistics? Well, for three reasons. The first is that I’d like to better correlate such statistics to what I’m seeing in practice. The amount of wealth leaving Canada that I’m witnessing would be eye-opening for many Canadians – even to those who seem to love bashing “the rich” and not being shy about telling them to not let the door hit them on the way out.
The second reason is I’d like to be able to track how much long-term federal and related provincial income tax loss there is as a result of those successful people leaving. Such cumulative revenue loss to the government can only be recovered by massive immigration (something we have experienced as a country in recent years), increased tax measures (yes, we’ve experienced that too) or increased economic activity (no, it’s well known that Canada’s economic performance has significantly lagged for quite some time).
The third reason is that I’d like to be able to estimate what opportunities Canada is losing because of such departures. If the successful people had stayed in Canada, would they have started new businesses (that would employ more Canadians) or otherwise used their wealth to attract more taxation revenues for Canada? My guess is an obvious “yes”, but I’d like to put some precision around such a guess.
To illustrate, let’s use an overly simplistic example. Let’s say Mr. Apple, a resident of Ontario (where the highest marginal tax rate is 53.53%…let’s round that to 54%), leaves Canada on January 1, 2026. He’s a wealthy individual. His entire net worth – say $100M – is cash that he has invested in GICs. The GICs earn annual interest of 5% (his sole income source). Ignoring graduated personal tax rates, Mr. Apple will pay 54% of his $5 million of interest income in tax – $2,700,000.
Let’s compare that to an average Canadian who lives in Ontario and earns salary income of, say, $50,000 (with no deductions or credits available to them). That person will pay roughly $10,000 in taxation.
In other words, to replace Mr. Apple’s taxation revenue, Canada needs 270 average Canadians to replace that loss. And that assumes there are jobs available for those 270.
Some of the above lost taxation revenue can be made up by Canada because of “departure tax” occurring in the year a Canadian permanently leaves. Departure tax is the lingo that is used in my profession since the Income Tax Act deems there to be a disposition of one’s assets at fair market value (FMV) immediately before a person becomes a non-resident of Canada, thus causing taxation on any appreciated gains on such properties (there are a variety of exceptions to this general rule). In some cases, however, one can carefully plan to take advantage of departure tax deferral opportunities or minimization.
In Mr. Apple’s case above, there would be no departure tax since the cost base of a GIC is often the same as its FMV thus resulting in no gain. Mr. Apple could easily leave Canada with little tax consequence.
Economic policies set by governments matter. In the past ten years, there is little doubt that it has had a negative impact on retaining successful Canadians. With skyrocketing federal spending currently happening, it appears that Canada is headed down a further economic path of increased taxation that will be inevitable to pay for such spending.
The C.D. Howe Institute recently released a report that predicts the federal government’s cumulative deficits over the next four fiscal years could be a staggering $311 billion. In my opinion, that is fiscally irresponsible, and our future generations will pay greatly with higher taxation loads and a poorer standard of living.
One way to deal with this is to develop tax and economic policies that make it enticing for successful Canadians to stay in Canada and to risk their capital for the benefit of all Canadians. This would also help attract new, successful Canadians as well.
Canada’s future prosperity depends on policies that reward ambition rather than punish it. When we drive away successful Canadians, we don’t just lose tax dollars – we lose innovators, job creators, and the very people who can help build a better future. It’s time for leadership that sees this clearly and acts decisively. As John C. Maxwell said, “A leader is one who knows the way, goes the way, and shows the way.”
This is Canada’s moment to stop the bleeding and start leading.
One Comment About Leadership – Effective Teams Need to Know Who Their Leader Is and What They Stand For
My social media feed is regularly flooded with recycled quotes from self-proclaimed leadership experts. One that keeps surfacing is the oft-cited line from Chinese philosopher Laozi (Lao Tzu):
“A leader is best when people barely know he exists. When his work is done, his aim fulfilled, they will say: we did it ourselves.”
Most posts drop the quote and move on, as if that alone defines effective leadership. It’s often implied that the best leaders should be invisible, silent, passive, almost ghostlike.
That’s fantasy.
Yes, the quote speaks to the power of quiet leadership, of guiding without needing applause. But in the real world, especially in professional settings, leaders must be seen. Teams need to know who the leader is, what they believe, and where they’re taking everyone. Leadership requires presence, not just outcomes.
Quiet leadership doesn’t mean being invisible. It means being decisive without arrogance, empathetic without weakness, and humble without disappearing.
Lao Tzu’s saying is a poetic reminder that ego-free leadership can be powerful, but it’s often misused to imply silence or detachment.
In short: lead with presence, not volume.
One Comment About Economics – Canada’s Projected Deficit is Massive
Last week, The C.D. Howe Institute, a well-respected think-tank, released a report entitled The Fiscal Update the Government Should Have Produced, And The Budget Canada Needs. It’s an eye-opening read that reinforces a lot of what I have been complaining about such as the need for a budget, the separation of the operating budget and capital budget is not helpful, and the deficits are expected to be massive.
From the Report:
The federal government has said it will not release a budget until the fall. Delaying a budget until the fiscal year is more than half over is never good, but Canada’s current high spending trajectory makes this delay especially bad. The government is making costly commitments without showing us the key numbers: how much more tax it expects to collect; how far its new spending will exceed its revenues; and what the resulting higher deficits imply for interest costs and our debt burden.
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The resulting bottom line represents a marked deterioration, as Table 1 shows. As recently as the April 2024 budget, the government projected the deficit to decline to $20 billion by 2028/29. With this baseline, and even if the imagined fines and savings were realized in full, the deficit that year would be more than three times that level. Even in this optimistic scenario, the deficit would average $78 billion annually over the four years, and the net debt-to-GDP ratio would rise to 45 percent. Excluding the speculative savings, the cumulative deficit would be almost $350 billion over four years – or an annual average of $86 billion – and the net debt-to-GDP ratio would increase to 46 percent. Further, the baseline deficit without any of the non-implemented initiatives in the electoral platform is still elevated at $66 billion per year on average.
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The large deficits projected in this update cannot be downplayed or disguised by dividing the budget into two new categories – operating and capital – and targeting a balanced operating budget only, as proposed in the election platform. No firm details have been released about what each category will include, but logically, the operating budget will consist of whatever does not fall under the new capital category.
The rationale for introducing a capital budget is unclear. Under Public Sector Accounting Standards, the federal government, like all Canadian governments, uses accrual accounting. So its capital costs are amortized over the useful life of the assets. As a result, the government’s Statement of Operations already shows costs related to capital investments: depreciation (about $7 billion per year) and interest on debt incurred when the outlays occur. As more capital assets are added – such as ports or defence equipment – amortization expenses will rise. But amortization reflects the current consumption of capital assets and should remain part of the bottom line. Excluding it would disconnect the federal budget presentation from the audited financial statements – a serious blow to transparency and accountability.
More troubling is the pledge to recharacterize as capital spending “new incentives that support the formation of private sector capital (e.g., patents, plants, and technology) or which meaningfully raise private sector productivity” (Liberal Party of Canada 2025). Governments like to call many categories of spending “investment.” Would the new classification mean the government would exclude subsidies for housing construction or incentives for first-time homebuyers from the bottom-line target? Would it reclassify other subsidies – for clean technology, artificial intelligence, or training programs, for example – as capital? What qualifies as capital under this framework appears open to subjective interpretation, undermining accountability. Without clear standards audited by independent sources, this approach is ripe for abuse.
And for what purpose? The government appears intent on showcasing how much it is doing for growth. But this does not require a new accounting convention. Their efforts could be highlighted through words and dedicated tables – not by altering the definition of the bottom line.
Couldn’t have said it better myself. And if this doesn’t concern you, you’re either not paying attention or you’ve given up caring. Adding $350 billion in additional debt over the next four years in a non-transparent way, is troubling.
Canada needs transparency and control in its spending.
Bonus Comment – Quote From General Dwight D. Eisenhower – About Effective Leadership
“Leadership is the art of getting someone else to do something you want done because he wants to do it.”
Totally agree. And, leaders, you don’t need to take the credit for such accomplishments that your teammates have done. But you need to be a good leader and show the way.
Hope you enjoyed this edition of 1-1-1. If you’re not already part of the In the Mood Network, now’s the time. Please sign-up today. Whether it’s through consulting, coaching, speaking, or writing, my work is about planting acorns: deliberate, principled actions that challenge the status quo and grow into something far bigger. The goal? Bold reform. Stronger foundations. And a country that values hard work and common sense.
