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Unformatted text preview: 3520-1: 8/25/20081-1113520 Lecture 1CTP Selected parts of Chapters 1 and 14 (see references below)For those who are interested in learning more, check out the urls.Recommended ProblemsAll Ch. 1 and 14 ExercisesAll Ch. 14 Self-study problems2Introduction to Federal Taxation in Canada [ch. 1]Any tax system has abase (what to tax);taxpayer or unit of taxation (who to tax); andrate (how much to tax).2.1Alternative Tax Bases [1-1 to 1-6]Several different tax bases in Canada:For income taxes (i.e., personal and corporate income taxes), the base is income.For social security/Payroll taxes (e.g., EI, CPP, EHT), the base is salary and benefits.For the GST, the base is the FMV of (most) goods and services.Canada relies more heavily on personal income taxes and less heavily on social security taxes to raise revenues than do other countries.See CTP Figure 1-1.2.2Taxable Entities Income Taxes [1-7 to 9]The Income Tax Act uses person to refer to the three entities that are subject to federal income taxation individuals, corporations and trustsIndividuals (not married couples) file T1s (i.e., personal tax returns) and are taxed at graduated personal ratesThe unit of taxation is the individual and the rate is graduatedi.e., the rate is lower at lower income levels and rises as income rises.See http://www.parl.gc.ca/information/library/PRBpubs/prb0707-e.htm.Corporations file T2s (i.e., corporate tax returns) and are taxed at flat corporate rates with special reductions for small businesses, etc.See http://www.parl.gc.ca/information/library/PRBpubs/prb0706-e.htm.Trusts file T3s (i.e., trust tax returns). Trusts created on death (testamentary trusts) are taxed at graduated personal rates but trusts created by living taxpayers (inter vivos trusts) are taxed at the highest personal rate (29%)The base is taxable income (as defined in the Income Tax Act) for all these taxpayers, although the rates differ2.3Federal Taxation & the Provinces Personal Income TaxesBefore 2000, only Quebec had different rules for personal taxes and a separate return. The other provinces charged their personal income tax based on a % of federal taxes. Jason Fleming [email@example.com]3520-1: 8/25/20082-11Now the federal government still collects personal income taxes for provinces other than Quebec but the provinces have their own computation of taxable income and tax rates. There are few significant differences so far. For example, Ontario uses the graduated rates and tax credits similar to what was used before. Only Alberta has something entirely different: a flat rather than graduated tax rate (i.e., the rate is the same no matter how much you earn)....
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- Spring '11