Types of Taxes in Canda
- Canada charges a progressive income tax.o" canada image by Kathryn Palmer from Fotolia.com
Canadian citizens must pay taxes to their federal and provincial governments to offset the costs of the services they receive. These taxes are then applied to federal and provincial aid programs and projects. Although tax rates in Canada are slightly higher than in the U.S., Canada enjoys a federal surplus rather than a deficit, allowing it to pass the additional revenue on to consumers. - The Canada Revenue Agency (CRA) oversees the collection of all federal income taxes. The tax rate varies depending on how much income an individual earns each year. As of 2010, citizens who earn less than $40,970 each year can expect to pay only 15% of their income to the CRA, whereas individuals earning more than $127,021 will pay the highest tax rate of 29%. Canadians must also pay provincial income tax. This form of income tax varies by province with the highest income tax rate being levied against those living in Manitoba and the lowest being levied against citizens of Nunavut.
- The Canadian government provides health care services free of charge to all citizens and permanent residents of Canada. Health care is monitored by each province and, in turn, each province possesses different rules regarding the additional financial contributions each individual must make toward funding the health care system. In Ontario, for example, individuals must pay an additional premium determined by the amount of taxable income they earned for the year. Unlike American insurance premiums, premiums for Ontario's health care costs, as a form of provincial tax, are added onto each consumer's annual tax debt and are not optional.
- Each Canadian province levies a separate sales tax on goods purchased in the province. Some provinces, such as Newfoundland, Nova Scotia and British Columbia, combine their provincial sales tax with an additional goods and services tax.- leaving residents to pay a much higher rate on purchases. This is known as having a "harmonized sales tax." Fortunately, retail sales taxes and harmonized sales taxes do not apply to all purchases consumers make. Although this too differs, depending on the province, necessities such as food, clothing and prescriptions are often exempt from taxation. Canada's Indian population is not required to pay either harmonized sales taxes or goods and services taxes in any province.
- Individuals who purchase gasoline or diesel fuel in Canada are subject to a fuel tax. The fuel tax differs depending on the province and is a combination of the province's goods and services tax and an excise tax. Excise taxes are applied to products manufactured and sold within the country. Companies often pass this charge on to consumers. The excise tax applied to fuel is not provincially regulated and rests at an additional charge of $0.10 per liter of regular gasoline and $0.04 per liter of diesel.
