Whether you are a Canadian resident or not, it is important to understand the basics of taxation in Canada. There are many factors that influence how much you will pay in taxes. Besides your income tax, you will also pay for taxes on your property, goods, and services, and Harmonized sales tax. This article will discuss the main components of taxation and how they are calculated. It will also help you calculate how much government spending on taxation affects an average Canadian family.
Property taxes
Using the information available, a study was conducted to compare the basic features of property taxes in Canada. This study compared relative tax rates among the different categories of residential and non-residential owners in five of the largest metropolitan areas in the country. The data is based on the sample of 9,769 homeowning families. The sample was limited to those who reported property taxes on their 1998 tax return. The results indicate that property taxes in Canada are relatively manageable for most families.
The most common type of property tax is levied by local governments. This includes taxes on all types of properties, including buildings, land and rented dwellings.
Property taxes are a key source of revenue for local governments in Canada. These are calculated based on the value of the property. The amount of the tax is determined by the rate of the tax and the assessed value of the property. Generally, residential property is assessed at a lower rate than non-residential property. The mill rate is commonly referred to as the tax rate.
The most common method of collecting property taxes is through a municipal tax warrant, which is issued by a municipality. The city sends the warrant to the Finance and Treasury Board, who bill the owner and collect the tax.
The property tax system uses the address of the owner, as well as the name of the property. The rate is usually calculated based on the assessed value of the property. The effective rate is usually somewhere between 0.9% and 1.2%.
The largest municipal taxes were imposed by Saskatchewan and Quebec, which had the highest taxes on residential and non-residential property, respectively. The provinces of Ontario and Alberta had the lowest rates.
Income tax deducted from paycheque by employer
Generally, your employer will deduct an amount from your paycheque to meet your tax obligations. This may include federal or provincial income taxes, EI premiums, and contributions to the Canada Pension Plan or QPP. If you have questions about your deductions, ask your employer.
If your employer hasn’t already done so, open up a payroll bank account. This allows you to keep track of all your deductions and fulfill your tax obligations.
You can make a payment to the Canada Revenue Agency online, or by mail. You can also use My Business Account to remit your payroll tax slips. You should also keep a copy of your payroll tax slips and receipts to help you verify that you have paid the proper taxes.
The Canadian government collects income taxes from workers to pay for public services. The government has created a complex formula to determine your income tax. You can check it out on line 43700 of your tax return.
If you haven’t already done so, you should learn more about the government’s program, EI. You should also know about the various forms of EI and the benefits they provide. You may qualify for EI benefits if you have been in insurable employment for more than a year.
It is also not a bad idea to check your pay stub for the appropriate sized deductions. This is important because you could be on the hook for some extra money if your employer failed to deduct the right amount.
The biggest problem with this is that it can be a very confusing system. For instance, you may be overpaying for a small item, or you might be missing out on a major item because your employer hasn’t made a deduction for it.
Goods and services tax
Whether you are a business owner or an individual, you are likely aware that Canada has a federal Goods and Services Tax. This tax is applied to most Canadian services and goods. In some provinces, the GST is blended with the provincial sales tax. Most businesses remit the GST monthly or annually to the Canada Revenue Agency.
There are two rates of GST: 7% and 15%. These taxes apply to goods and services in all Canadian provinces.
Most supplies are exempt from GST. This includes newly acquired goods, goods that are provided by a public institution, and supplies of services. However, some goods are subject to the tax.
Some non-residents are not required to pay GST/HST. These include residents of offshore areas of Nova Scotia, residents of Labrador, and First Nations individuals.
The tax is also charged on barter transactions and most licensing arrangements. In addition, a shipping and handling tax is levied on most non-taxable product purchases.
A GST/HST Invoicing Decision Tree describes how UBC treats supplies. These rules are based on whether a supplier has a valid HST registration number. It is advisable to obtain this number before selling a product or service to a consumer.
Input Tax Credit (ITC) is available to businesses that make taxable supplies. This allows them to recover the tax they have paid on their purchases. These purchases may be used for other purposes, but not for improvements to capital property.
A purchase made exclusively in a commercial activity may qualify for the full ITC. For example, a manufacturer may bill PST on Value Hardware, and a distributor can claim ITC on the sale of these goods.
Harmonized sales tax
Whether you are a consumer or a business owner, you need to know the basics about the new Harmonized sales tax in Canada. This is a federal and provincial tax that will be implemented in Ontario, British Columbia, and Nova Scotia on July 1, 2010.
It is not yet known what the new tax will look like in B.C., but in Ontario, it will consist of a 5% federal part and an 8% provincial part. It will replace the PST.
While the provinces will determine which goods and services are exempt from the PST, most will be subject to HST. For example, children’s car seats, gasoline, and children’s clothing will all be subject to the new tax.
The harmonized sales tax will be administered by the Canada Revenue Agency. The system is designed to simplify the collection and administration of taxes. In addition, the system will provide consumers with tax credits.
The federal government has imposed a $1.6 billion transition fund to assist businesses in dealing with the changes. It also plans to allow companies to update automatic payments to include the new tax.
Some provinces have already adopted the harmonized sales tax. In Quebec, most goods and services are subject to the tax. In New Brunswick, the tax is combined with the federal sales tax. In Prince Edward Island, the harmonized tax was introduced to replace the goods and services tax.
The Canadian Federation of Independent Business says the increase will hurt jobs. Local governments are urging residents to avoid the tax. The Atlantic region is one of the most taxed regions in the country.
Calculations help estimate the cost of government for the average Canadian family
Among the millions of Canadians that straddle the border, some of which happen to be lucky enough to be born and raised in the right hemisphere, it’s important to take a close look at the big picture and ask yourself if your family really is getting the best bang for your buck. A smidge more than a quarter million of Canada’s ten million plus residents are living below the dreaded federal poverty line and there’s no shortage of programs and services to help them get on their feet. The trick is in knowing which ones to target first and which ones to avoid at all costs. Using a tool like the Good to Great program helps you decide which programs to focus your efforts on and which ones to leave afoot. It’s also a great way to weed out duds before they hit the fan. The program has also compiled the most comprehensive list of federal government programs and services to date, thereby ensuring your family’s needs are covered from the start. A little research goes a long way and the good news is that you won’t have to drudge through any red tape.
