Canada taxes
1 Taxation
The major income of Canadian government comes from taxation at about 70% and remaining from other sources like tariffs, fees, investments etc. Out of OECD countries, the level of Taxations in Canada found as average. The tax on income was introduced as temporary measure for funding the war during 1st world ward. The tax system changed after 2nd world war. Though revenue percentage fell from 90% to 40% in 1946, still the Canadians continued to pay the income taxes and direct taxes which become major funding to the government. The Federal taxes are collected by the Canada Revenue Agency (CRA).
1.1 Income taxes
The Federal and provincial government impose income taxes on individuals. The Federal government charges at bulk level whereas the provinces charges at lower level. There was a strategy that high income residents pay higher percentage of tax and low income residents will pay lower percentage. However tax shield is available if the income is saved under Registered Retirement Savings Plan. The Canada Revenue Agency created GIFI which provides a unique code to the list of items like income statements, balance sheets, retained earnings etc. The CRA will process more efficiently to collect the taxes using GIFI system. GIFI means General Index of Financial Information.
1.2 Personal Income taxes
The individuals should pay the income tax under Federal as well as Provincial/territory. For the year 2008, the Federal Tax rate ranges between 15% to 29% on taxable income. In case of Provincial/territory tax rates varies for each province. The minimum rate is 4% and the maximum rate is 17.95% on taxable income. The calculations should be made in Form 428.
1.1.1 Corporate taxes
The companies and corporations should be pay tax on profit income and on capital. The tax should be paid on the corporate income before distribution of dividends to the shareholders. However tax credit will be provided to the individuals who receive dividend in connection with tax paid at corporate level. The corporate taxations and tax rates depends upon type of corporation. For example, the Canadian-controlled private corporation has corporate tax advantage than other corporations. The other entities also exist i.e. Private Corporation, public corporation, besides Canadian-controlled Private Corporation. The Corporation is taxed separately from the individual. So as a business owner capacity, the individual has to file T1 for personal and T2 for corporation. The general corporate rate 34.5% and planned to reduce to 34% in 2009.
1.1.2 Sales taxes
The Canada has three types of sales taxes i.e. provincial sales taxes (PST), federal goods and services tax (GST) and Harmonized Sales tax (HST). The Federal GST rate is 5% from January 1, 2008. All provinces except Alberta implemented Provincial Sales Tax or Harmonized Sales Tax. The Sales tax for such provinces ranged between 5 to 10. The Sales Tax is charged on the purchase of certain goods and services
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