MBA Canada

Taxes in Canada

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People in Canada enjoy many government-funded benefits, such as healthcare, education systems, interconnecting highways, clean drinking water and sanitation systems. To support these services, Canadians pay all sorts of taxes to the federal and provincial governments.

Income Tax

The income tax dominates the annual revenues of the Government of Canada and the governments of the Provinces of Canada. To explain this point, in the last fiscal year, the government of Canada obtained approximately three times more personal income taxes than the corporate income taxes. Every Canadian who earns more than $9,000 a year (in 2007) pays a portion of his or her income to the government. If you are employed, your employer will deduct income tax from your paycheck and send it to the government.

International taxation

Also Canadian individuals and corporations contribute paying income taxes based on their world-wide income. They are protected of double taxation through the foreign tax credit, which authorizes taxpayers to deduct from their Canadian income tax otherwise payable the income tax paid in other countries. A citizen who is at present not a resident of Canada might ask the CRA to modify his status so that income from outside Canada is not taxed.

Sales Taxes

When you buy an item or you contract a service, the announced price or the price on the tag is particularly not the final amount you will pay. One or more types of taxes may be added:
  • Goods and Services Tax (GST): A 6% federal tax applies to most goods and services sold in Canada.

  • Provincial Sales Tax (PST): With the exception of Alberta, the provinces also tax many new and used items (but not services). The rate varies by province.

  • Harmonized Sales Tax (HST): In Nova Scotia, New Brunswick and Newfoundland and Labrador, the GST and PST are combined into a single tax - the HST. The HST is 14% (6% GST plus 8% PST) and is added to the cost of the goods or services for the final total price.

Other Taxes

There are other types of taxes that are less experienced by citizens, or that may not be as obvious as PST, GST and HST.

Hidden taxes.- Some products, such as alcohol, tobacco products and gasoline, already include some additional kinds of tax (such as import duties, gas taxes and excise taxes) in the purchase price.

Liquor tax.- In some provinces, when you order alcoholic beverages at a restaurant or bar, a liquor tax may be added to the bill in addition to PST.

Hotel room tax.- In some provinces, hotels charge an additional tax.

Airport taxes.- When you purchase an airline ticket, an airport improvement or security tax may be added.

Property taxes.- The municipal level of government is funded particularly by property taxes on residential, industrial and commercial properties. These account for almost 10 percent of total taxation in Canada. Householders pay an annual tax, taking as reference the value of their property, to cover the cost of city-supplied services and schools in their area.

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Money & Finance in Canada
MBA Canada