OECD urges Canada to raise interest rates

By CBC News, cbc.ca, Updated: May 26, 2010 11:40 AM

OECD urges Canada to raise rates

Canada should raise interest rates "without delay" and let economic stimulus measures expire to avoid inflation, the OECD said in its annual forecast Wednesday.

The Organization for Economic Co-operation and Development recommended the Bank of Canada continue to raise rates to more normal levels over this year and through 2011.

The advice comes six days before the bank is scheduled to announce whether it will increase its benchmark lending rate from record low levels.

Many economists had been predicting that with signs of growing economic recovery, the bank would start raising rateson June 1, but that has become less certain amid concerns that the effects of the European debt crisis may spread, slowing recovery in North America and growth in emerging economies.

The OECD said the bank should proceed with higher rates, and that the government should outline spending cuts and the details of how it plans to reduce its deficit.

The OECD has also raised its forecast for Canadian economic growth, to 3.6 per cent this year and 3.2 per cent next year.

It said the Canadian economy is recovering "vigorously" from the recession, lifted by a recovery in trade and government stimulus.

It did, however, warn the "high rate of household indebtedness" could undermine the recovery. In its overall forecast for its member countries, the OECD said the world economy is recovering "faster than expected."

But, it said, the debt crisis and overheating in emerging-market economies present increasing risks.

'Critical time for the world economy'

It projected OECD countries will grow by 2.7 per cent this year and 2.8 per cent in 2011.

Its forecast called for the U.S. economy to lead the OECD, with expansion of 3.2 per cent in both 2010 and 2011.

It predicts Japan's growth will be 3.0 per cent this year and 2.0 per cent in 2011.

European members of the OECD will be weighed down by the debt crisis, it said, and will growth at 1.2 per cent in 2010 and 1.8 per cent in 2011.

The need to deal with the debt crisis and still get deficits under control will require careful policy co-ordination, said Angel Gurria, the OECD's secretary general.

"This is a critical time for the world economy," he said in a statement.

Some Bankruptcy Myths

For most people, bankruptcy is the adult version of the child's bogeyman in the closet at night. There are plenty of myths about it, and most of the time, those myths only serve to make a tough situation even tougher. But like that bogeyman, the fears diminish when you figure out what is really going on.

Here are five myths about bankruptcy and some truths that might help to turn a light on.

Bankruptcies involve expensive lawyers

In Canada, practising lawyers are not allowed to be bankruptcy trustees. This is different from the U.S., where bankruptcies are nearly always handled by lawyers. Licensed Canadian trustees might have gone through law school, but under Canadian law, they may either work as a trustee or a lawyer, not both.

"Small bankruptcies and consumer proposals do not require a court file, because a bankruptcy trustee is an officer of the court. So the filing of the bankruptcy is deemed to be accepted without going before a judge," says Colleen Craig, a bankruptcy trustee in Victoria, British Columbia.

As well, "since the law changed in 1997, there has been no requirement to advertise a simple, personal bankruptcy in the papers." So, if you're worried about your privacy, you can relax; the whole world does not have to know.

According to Toronto attorney Mark Laugesen, many people confuse restructuring proceedings with bankruptcy. Restructuring is a corporate process, and both corporate bankruptcies and restructuring usually require the services of an attorney, while a personal bankruptcy does not.

They'll take everything but the house

Many people believe that as part of declaring bankruptcy, you're giving up almost all of your worldly possessions. But that's not necessarily so, says Frank Kisluk, an Ontario bankruptcy trustee who has written two books on consumer debt and bankruptcy. "Out west you have homestead protection -- a certain amount of your equity is protected -- but in Ontario, your principal residence is not protected. If you have a home with equity, that equity goes to the creditors."

Different provinces have different rules about what you can keep. But while you are in bankruptcy, you can't keep much. In fact, you can only make a small amount of money
($1,870 a month for an individual). If you make more than that, the period of your bankruptcy may be extended. Deciding to declare bankruptcy means making a commitment to a very modest standard of living for at least nine months.

All of your debts are erased or paid

For better or worse, there are several instances when debts endure even after declaring bankruptcy. Alimony and child support are not changed by a declaration of bankruptcy. Student loan debts also remain after bankruptcy unless it has been at least seven years since your last day of school, although this can be challenged as a hardship after the bankruptcy is settled.

When you become bankrupt, all of your assets are transferred to your trustee. You are no longer responsible for your debts, but neither do you hold your assets.

Once you have declared bankruptcy, it is no longer your job to pay off your old debts. If your creditors cannot be located, the money goes into an account to be held indefinitely by the government. There is a database online where creditors can claim the funds owed to them if a trustee can't find them. It's interesting to note that the largest unclaimed amount in the database is currently over $100,000.

There's a set period of time when you are considered bankrupt

When a bankruptcy ends, the person who declared bankruptcy is discharged by the court; however, a discharge is not always automatic.

"Coming out of bankruptcy is a bit like coming out of a washing machine," says Craig. "You are eligible to be discharged at a certain time, but there are three people who can oppose your discharge: the trustee, the Office of the Superintendent or your creditors. Opposed discharges go automatically to court -- the worst that can happen is that you are deemed to be bankrupt forever." Craig says this happens very rarely and usually only in cases where fraud occurred.

More commonly, a bankrupt individual might not have fulfilled all the conditions of his or her agreement and will then be required to stay in bankruptcy for a total of 21 months.

You'll never get credit again

After nine months most bankruptcies are discharged.

"People assume they'll never have credit again, but it's not unusual for people to be able to re-establish all the credit they need in one to two years after declaring bankruptcy," says Kisluk.

Everyone's case is different, but it's always worth taking the time to discover the truth. With the closet monster gone, it's easier to sleep, breathe and, ultimately, get on with your life.

 The above article was written by Stephanie Farrington, Bankrate.com on  Thursday, November 26, 2009. Stephanie is a writer based in Victoria.

The importance of saving

Day to day, in credit counselling, we preach the importance of learning how to save and why it is so important. Today's article in the Globe by Angela Self makes the point very well.

"If you had to finance an unexpected expense of $5,000, could you? One-quarter of us could not, even with the aid of a credit card or line of credit. One in 10 of us would even have difficulty handling an unexpected expense of $500, according to a new report by the Certified General Accountants Association of Canada.

One-third of non-retired Canadians don’t commit resources to any type of regular savings – not even for retirement. This makes surprise expenses hard to handle. But here’s the scarier part: Saving for vacation and entertainment get higher priority among younger households, compared with saving for education or home down payment. If you’ve got a Hawaii fund before an emergency fund, you’ve got a problem – or you’re likely to have one soon.

Starting an emergency fund can be as simple as depositing $100 or less into a high-interest savings account. You can quickly find one that’s right for you at the Financial Consumer Agency of Canada’s site (fcac-acfc.gc.ca/eng/consumers/ITools/CoB/default.asp).

After the account is set up, make it a habit to stash small amounts or unexpected gains into your account instead of your wallet. If you’re carrying debt, apply the same approach to your credit cards or loans to ensure room for unforeseen emergencies. Setting up regular automatic withdrawals is an even easier approach. Once you’ve reached your savings comfort zone, then you can start planning for your next Hawaiian luau."

Angela Self is one of the founders of the Smart Cookies money group. Read her weekly column on managing debt and saving money at globeinvestor.com.

From Tuesday's Globe and Mail Published on Tuesday, May. 11, 2010 10:31AM EDT Last updated on Tuesday, May. 11, 2010 7:13PM EDT

Filing changes to your tax return

Thanks to Tim Cestnick, managing director of WaterStreet Family Wealth Counsel, for the following article extract, published in The Globe and Mail, April 30, 2010

Making changes You send in your tax return thinking all is well and then discover after the fact that another T-slip arrives in the mail a few days later. Or perhaps you’re going through your files from last year’s tax return and discover some receipts that should have been kept in this year’s file – so they were missed when you prepared this year’s return (you did check last year’s file, didn’t you?).

Could it be you didn’t forget anything, but simply made a mistake? Common mistakes include failing to transfer certain tax credits to a family member to save more tax (age, disability, pension, tuition, education, textbook, public transit and donation tax credits come to mind), forgetting some types of business expenses (did you claim capital cost allowance on your computer, desk or owned vehicles used in business?), forgetting safety deposit box fees, among other mistakes. 

If you did forget something, or made a mistake, you can easily make a change by filing Form T1-ADJ (called an “adjustment request”). It’s a one-page form where you simply make note of the lines on your tax return you’d like to change, provide an explanation at the bottom, and send it in. No need to file a complete amended tax return. You’ll find a copy of Form T1-ADJ on the Canada Revenue Agency’s (CRA’s) website at cra.gc.ca. 

Fighting your cause
Once you’ve filed your tax return, you can expect to receive a Notice of Assessment within three to five weeks. If your tax return is not assessed as you filed it, you should take a close look at the change until you understand why the change was made. Speak to CRA to more fully understand the change if you have to. 

If you disagree with your Notice of Assessment, you’ve got two courses of action to consider. Your first step should be a phone call to CRA to resolve the issue by phone if you can. 

If that doesn’t work, then you may want to file a Notice of Objection. You can use Form T400A to file your objection, which I like to do, but it’s not necessary. You can also file an objection by stating in a letter the facts, your reasons for objecting and the change you’re requesting. Address your letter to the chief of appeals at your local tax services office or taxation centre.

Questions or comments can be directed to rosst@rosstaylor.org