Taxation

 

Answer Key

In Canada, taxes are an important source of revenue for the government. The federal government collects income tax from individuals and businesses based on their [income], including all income earned both inside and outside Canada. The Harmonized Sales Tax (HST) is applied to most goods and services sold in Canada, with current rates ranging from [5%] to [15%].

To avoid [double taxation], Canada has tax treaties with many other countries that provide for a credit in one country for taxes paid in the other country. In addition, Canada has a foreign tax credit system that allows Canadian residents to claim a credit for foreign taxes paid on their [income].

The [underground economy] refers to economic activity that is not reported to the government for tax purposes. Tax evasion is the intentional failure to pay taxes that are owed, while tax avoidance is the use of legal means to reduce one's tax [liability].

The Canada Revenue Agency (CRA) is responsible for administering tax laws and collecting taxes, and conducts [audits] to ensure compliance. Municipalities use property taxes to fund local services such as garbage collection, parks, and [libraries].

Canada has a progressive income tax system, and taxpayers may be eligible for tax [credits] for charitable donations, medical expenses, and tuition fees. Tax season typically runs from February to April, with returns due by [April 30th].

The CRA encourages taxpayers to file electronically using its [NETFILE] service, which allows taxpayers to file their returns online. Taxpayers who are self-employed have additional tax obligations, including paying both the employer and employee portions of Canada Pension Plan (CPP) and Employment Insurance (EI).

The CRA also administers the Goods and Services Tax (GST) and the Provincial Sales Tax (PST) in some provinces. The GST is a value-added tax applied to most goods and services sold in Canada, while the PST is applied to certain goods and services in certain provinces.

Canadian residents must report their [global income] on their tax returns, including income earned from foreign sources. Failure to report foreign income can result in [penalties and interest charges].

In addition to income tax, Canadians may also be subject to other taxes, such as property tax, capital gains tax, and estate tax. Taxpayers who owe taxes may be subject to interest charges and penalties if they do not pay on time.