1. Purpose of Taxation and its Role in Public Finance Flashcards
(78 cards)
1
Q
What are the three main purposes of taxation in Canada?
A
- Revenue generation
- Redistribution of wealth
- Influencing behaviour.
2
Q
Who are taxes collected from?
A
- Individuals
- Businesses
- Trusts
3
Q
What are taxes collected by governments allocated for?
A
To fund public services and infrastructure
4
Q
What is the Canada Revenue Agency?
A
Administer taxes, benefits, and related programs for the Government of Canada (federal government) and most provinces and territories
5
Q
What entities are obligated to pay taxes on their income?
A
- Individuals
- Businesses
- Trusts
6
Q
What document calculates the amount of tax owing?
A
Tax Return
7
Q
Are the calculations for computing total tax liability for individuals, businesses and trusts the same?
A
Complex and distinct from one another
8
Q
What tax return is each taxable entity subject to?
A
Individual: T1
Business: T2
Trust: T3
9
Q
What tax return are individuals subject to?
A
T1
10
Q
What tax return are businesses subject to?
A
T2
11
Q
What tax return are trusts subject to?
A
T3
12
Q
What is a tax return?
A
A government form used by a person or organization that presents an account of income, applicable expenses and credits and information on other relevant provisions that are used to determine liability for tax
13
Q
What previously paid amounts are included on the tax return?
A
Amounts already paid against the liability for the period
14
Q
How are personal income taxes deducted for most employees?
A
At source (e.g., through payroll systems)
15
Q
How are personal income tax deductions calculated? How are they remitted to the government
A
Employers calculate deductions using tax tables published by the Canada Revenue Agency (CRA) and remit them directly to the government
16
Q
How are corporate taxes paid?
A
In instalments based on anticipated annual profits, with adjustments made upon filing tax returns
17
Q
When are adjustments for corporate tax returns made?
A
Upon filing tax returns
18
Q
When are trust taxes generally paid?
A
No later than 90 days after the trust’s tax year-end
19
Q
When are sales taxes collected?
A
At the point of sale by businesses and remitted periodically to the CRA
20
Q
When are sales taxes remitted to the CRA?
A
Periodically
21
Q
What are the 3 different sales taxes that exist in Canada?
A
- Goods and Services Tax (GST)
- Provincial Sales Tax (PST)
- Harmonized Sales Tax (HST)
22
Q
What is goods and service tax (GST)?
A
A federal tax you pay on most goods and services you purchase in Canada
23
Q
Does the goods and service tax rate vary between provinces and territories?
A
No, the rate is the same across the country
24
Q
What is provincial sales tax (PST)?
A
A tax some provinces charge
25
How does provincial sales tax (PST) vary between provinces?
The rate and the items they tax are different between provinces
26
What is harmonized sales tax (HST)?
A tax some provinces charge. These provinces combine the GST with the PST to form the HST
27
Who are property taxes collected by?
Municipal governments
28
What are property taxes calculated based on?
Upon the value of lands and buildings
29
What level of government typically administers property taxes?
Municipal government
30
What are duties and tariffs?
Taxes that the federal government charges on certain imported and exported products
31
What are the tax revenues collected from individuals, businesses, and other entities then allocated to fund?
- Public goods & services
- Welfare programs
32
How does Canada's taxation system improve the quality of life for its residents?
Funds a variety of public programs and services aimed at improving the quality of life for its residents
33
What message does the CRA state on its website?
"The government uses the taxes it collects to pay for the public facilities, programs, and services we enjoy every day in Canada)
34
What do taxes help pay for?
- Education and schools
- Health care and hospitals
- Roads and bridges
- Police, ambulance, and fire services
- Libraries
- Parks and playgrounds
- Arenas
- Swimming pools
- Garbage and recycling collection
- Economic development
- Wildlife conservation
- National defence
35
What is the central aim of taxation as a distribution tool?
- Balance economic disparities
- Enhance social equity
- Provide everyone with a basic standard of living
36
While it doesn't eliminate inequality, what is the goals of taxation as a redistribution tool?
Reduce its extremes and foster social cohesion
37
How does taxation act as a tool for redistribution of wealth?
Aiming to reduce economic inequality and ensure social welfare through the use of a progressive taxation system
38
How is a progressive taxation system used to allocate taxes collected to fund various public services and social programs?
With the use of subsidies and tax credits that are made available to taxpayers, allocation of taxes collected help fund these services and programs
39
What is an example of a social benefit program that uses taxes to determine eligibility and payment amounts?
Canada Child Benefit (CCB) use tax data to determine eligibility + payment amounts
Lower-income family might receive $500/month/child, funded by higher tax contributions from wealthier individuals
40
How do governments use taxes to achieve specific societal goals?
To encourage or discourage certain behaviours as a means to achieve specific societal goals
41
How does taxation influence behaviour?
By altering the costs and benefits associated with various activities
42
What are the 8 ways taxation can impact behaviour?
1. Consumption choices
2. Saving and investment
3. Labor and work effort
4. Business behaviour
5. Environmental impact
6. Housing and real estate
7. Social and lifestyle choices
8. Indigenous communities
43
How does taxation impact consumption choices?
- Sin taxes
- Carbon pricing
44
What are sin taxes?
Canada imposes excise taxes on tobacco, alcohol, and cannabis to discourage consumption while raising revenue
45
How have sin taxes contributed to declining smoking rates?
High tobacco taxes
46
What are taxes on alcohol designed to do?
Vary by province but generally designed to limit excessive consumption
47
What is carbon pricing?
Canada's implemented a federal carbon tax to reduce greenhouse gas emissions.
48
How does carbon pricing reduce greenhouse gas emissions?
Tax increases fuel costs, encouraging energy efficiency and the use of greener alternatives, like public transit or electric vehicles
49
How do taxes impact saving and investment behaviour?
- Registered Retirement Savings Plan (RRSP)
- Tax-Free Savings Account (TFSA)
50
What is a registered retirement savings plan (RRSP) and how does it influence saving and investment behaviour?
Contributions to RRSPs are tax-deductible, and investment growth is tax-deferred, encouraging Canadians to save for retirement
51
How do tax-free savings accounts (TFSA) encourage saving and investment behaviour?
Investment earnings within a TFSA are tax-free, providing an incentive to save and invest without worrying about future tax liabilities
52
How to taxes affect labour and work effort?
- Marginal tax rates
- Childcare benefits
53
How do marginal tax rates affect labour and work effort?
Canada's progressive income tax system means higher earners pay a larger % of their income in taxes. May discourage additional work at the upper end, though it redistributes wealth to fund public services
54
How can marginal tax rates discourage additional work at the upper end? How do they fund public services?
Progressive income tax system means higher earners pay a larger % of their income in taxes
Redistributes wealth to fund public services
55
How do childcare benefits affect labour and work effort?
Tax credits like the Canada Child Benefit (CCB) reduce the financial burden of raising children, encouraging workforce participation, particularly among parents
56
How do taxes impact business behaviour?
- Corporate tax rates
- Carbon pricing for businesses
57
How do corporate tax rates impact business behaviour?
Canada's relatively competitive corporate tax rate attracts investment, though provinces like Alberta and Ontario also adjust rates to entice businesses
58
Give examples of how provinces adjust tax rates to entice businesses.
- Quebec offers tax incentives for industries like tech and aerospace
- Ontario provides tax credits for innovation such as the Ontario Innovation Tac Credit
59
How does carbon pricing for businesses impact business behaviour?
The federal carbon pricing system motivates companies to reduce emissions or invest in greener technologies
60
How do taxes influence environmental impact?
- Carbon tax rebates
- Green energy incentives
61
How do carbon tax rebates affect environmental impact?
To offset the financial burden of carbon taxes, Canadian households receive rebates (Climate Action Incentive Payments), maintaining public support for environment initiatives
62
How do green energy incentives affect environmental impact?
Tax credits for solar panels, energy-efficient home renovations, and zero-emission vehicles encourage environmentally conscious choices
63
How do taxes impact housing and real estate behaviour?
- First-time home buyer incentives
- Speculation and vacancy taxes
64
How do first-time home buyer incentives impact housing and real estate behaviour?
Programs like the First-Time Home Buyer's Tax Credit and the Home Buyers' Plan (HBP) help Canadians enter the housing market by reducing upfront costs
65
How do speculation and vacancy taxes impact housing and real estate behaviour?
Cities like Vancouver and Toronto have implemented taxes on vacant homes and foreign buyers to cool real estate speculation and increase housing availability
66
How to taxes impact social and lifestyle choices?
- Charitable donations
- Tuition and education
67
How to charitable donations (in the context of taxes) impact social and lifestyle choices?
Canadians receive tax credits for charitable donations, encouraging philanthropy
68
How do tuition and education (in the context of taxes) impact social and lifestyle choices?
Tax credits for tuition fees make post-secondary education more accessible, shaping career and educational choices
69
How do taxes impact Indigenous communities?
- Tax exemptions
70
How do tax exemptions impact Indigenous communities?
Under Section 87 of the Indian Act, certain income and goods for Indigenous peoples on reserves are tax-exempt. this affects economic and resource management in Indigenous communities
71
Who are tax rates in Canada set by?
The various levels of government, including the:
- federal government
- various provinces and territories
- municipal governments, such as cities
72
What tax rates does the federal government set?
Income tax rates, GST, and excise taxes
73
Who administers and enforces federal government taxes?
The CRA
74
What tax rates do provincial/territorial governments set?
Provinces and territories establish their own tax rates for personal and corporate income taxes
75
What tax rates do municipal governments set?
Municipalities rely on property taxes and user fees.
Property tax is based on assessed property values
76
What do municipal government taxes fund?
Local services like waste management and public libraries
77
How does taxation serve as a tool for governments to shape societal behaviour?
By influencing costs, benefits and incentives
78
What does the specific effect of taxes on societal behaviour depend on?
The design of the tax system, public awareness, and the elasticity of demand and supply for the taxed activity
