Canada’s Tax System

Six characteristics of a tax system Who pays the tax The tax base The rates to be applied to the base General exemptions General deductions Other measures, such as how tax is to be paid These determine how much revenue is produced, how fair the tax system is, and its ability to produce economic growth.

Based on the principle of self-assessment Tax payers complete their tax return every year to report their income and calculate whether they owe tax or if they receivee a refund It is the most economical and efficient way to collect tax.

Tax Payers bill of rights Why do you think the CRA felt the need to publish these rights? Would you add anything to this list?

Types of taxes GST/HST GST – 5% tax that applies to most goodsand services in Canada There are two taxes, the GST (Goods and Services Tax) & PST (Provincial Sales Tax) In NL and some other provinces, these are combined into HST (harmonized sales tax)

Direct vs indirect taxation Direct taxes are paid by the taxpayer directly to the government. Indirect taxes are paid by the taxpayer to a third party (such as a retail store) who remits the tax to the government.

Direct and indirect taxation Which are these? Income tax: a tax levied on the income of individuals, corporations, and trusts. Tobacco tax: a tax applied to the sale of cigarettes, cigars, and other tobacco products GST/HST: a tax on the supply of products and services Property tax: a tax levied on the value of a property

Kinds of taxes Proportional/flat taxes – applied at a constant rate regardless of income level and type. Progressive income tax – individuals pay a larger percentage of tax as their income increases. Regressive income tax – individuals pay a decreasing percentage of income in tax as their income increases. A sales tax is considered regressive since high income earners pay a smaller part of their income in tax than middle income earners.

GST/HST Credit You can apply for this credit, if: You are at least 19 years of age or older You have (or previously had) a spouse or common law partner; or You are (or previously were) a parent and live 9or previously lived) with your child. Paid out every quarter (January, April, July, October)

T4 Slips Statement of remuneration paid Completed by the employer Employers have to release these slips by the end of February for each tax year