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Unformatted text preview: 3520-1: 9/4/111-1413520 Lecture 1Canadian Tax Principles (CTP) – Selected parts of Chapters 1 and 2 (see references below)Recommended Problems:Ch. 1: Exercises One-1, 3, 4, 6 and Self-Study Problem One-1Ch. 2: All Exercises and 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 exist in Canada:For income taxes (i.e., personal and corporate income taxes), the base is income – technically taxable incomeFor social security/Payroll taxes (e.g., EI, CPP, EHT), the base is salary and benefitsFor the HST/GST, the base is the FMV of (most) goods and servicesCanada relies more heavily on personal income taxes and less heavily on social security taxes to raise revenues than do other countriesSee CTP Figure 1-12.2Taxable Entities – Income Taxes [1-7 to 1-10]The Income Tax Act(the “Act” or “ITA”) 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 tax 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 risesSee http://www2.parl.gc.ca/content/lop/researchpublications/prb0707-e.htmCorporations file T2s (i.e., corporate tax returns) and are taxed at flat corporate rates with special reductions for certain private corporations earning business income, etc.See http://www2.parl.gc.ca/content/lop/researchpublications/prb0706-e.htmTrusts 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% federally)The base is taxable income (as defined in the Act) for all these taxpayers, although the rates differJason Fleming [[email protected]]3520-1: 9/4/112-14Certain entities are exempt from income tax including: municipal governments; most Crown corporations; registered charities; most non-profit organizations; and pension trusts and pension corporations (including RPPs, RRSPs, deferred profit sharing plans and registered retirement income funds) 2.3Federal 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 Now the federal government still collects personal income taxes for provinces other than Quebec but the provinces have their own 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 and tax credits similar to what was used before....
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This note was uploaded on 01/19/2012 for the course ADMS 3520 taught by Professor S during the Spring '09 term at York University.
- Spring '09