AbnashK.

Bassi
Unit3ReflectiveResponse:TaxesandYou

Whatwouldlifebelikewithouttaxes?Peopleoftenseetaxesasahindrance,asextra
coststhatshouldnotexist.Wealsoseefrequentoutrageoverhighertaxesandtaxincreases.A
politiciansstancewhenitcomestoraisingtaxescanswaytheresultsofanentireelection.
Sometimes,thisleavesuswonderingaboutwhytaxesevenexist.Asyoungadults,
understandingtheimportanceoftaxescanhelpusfeelbetteraboutpayingtaxes,anddevelop
anappreciationoftheservicespayingtaxesprovidesuswith.

Taxesaredefinedasbeingasumofmoneydemandedbyagovernmentforitssupport
orforspecificfacilitiesorservices,levieduponincomes,property,sales,etc.(Dictionary.com).
Whatthismeansisthatthemajorityofservicesprovidedbythegovernmentarepaidfor
throughtaxes.Ifwedidnotpaytaxes,thegovernmentwouldnotbeabletoprovideuswiththe
servicesthatwe,forthemostpart,takeforgranted.Taxeshaveexistedsinceearlycivilizations,
suchasancientEgypt,Rome,andGreece.Thetaxesvariedfromtaxationonproductsand
wartimetaxestotaxesonforeignersandinheritance.Throughtaxation,thesecivilizationswere
abletofundmanyoftheirservices.Thisideaoftaxationissomethingthathasremainedwithus
sincethen,andtoday,taxationprovidesourgovernmentswithfundingforvariousservices.

InCanada,federal,provincial,and
municipalgovernmentscollectmoney
frompeopleandbusinessestofund
governmentprogramsandservices,like
roads,schools,healthcare,public
utilities,economicdevelopment,and
more.Oneformoftaxationissales
taxes.Salestaxesaretaxeschargedon
manygoodsandservices,with
exceptionsforthingslikechildcare
servicesandprescriptiondrugs.These
taxescanvaryfromprovincetoprovince.
Forexample,inOntario,thereisaHarmonizedSalesTaxof13%.8%ofthisgoestothe
provincialgovernmentandtheremaining5%goestothefederalgovernment.Ontheother
hand,inBritishColumbia,wehavea5%GSTanda7%PST.Therearealsocertainexceptions
whenitcomestotheamountofPST,suchaswithliquor,whichhasa10%PST.Thetaxesyou
paycorrelatewiththeservicesprovidedbytheprovince,whichcanmeanthatOntario,which
hasmorepeopleaswell,needsmoremoneyforservicesthanBC.

Incometaxesaretaxesthatmustbedirectlyfromyourincome,oftenintheformofan
annualtax.ThesetaxesarecollectedbytheCanadianRevenueAgency(CRA).Thetaxesare
basedoffofyourincome,sothetaxismoreifyoumakemoremoney.Thereisnoagefor
incometaxes,soevenifyouareaminor,youstillmustpayincometaxesifyouwork(earnan

income).Ifyoumakebelowthepersonaltaxexemptionamount($9600in2008),youwouldget
arefundandgetallyourtaxesback.Eachyear,thereisanincometaxreturnthatmustbe
completed.Onthisreturn,thetaxesyoumustpayaredeterminedbyyourtaxableincome,
deductions,andtaxcredits.Taxreductionsandcreditsreducetheamountoftaxesyoumust
pay.AllCanadianresidentsmustpay,buttherulesforimmigrantsareslightlydifferent.There
arealsofederaltaxratesandthenadditionalprovincialtaxrates.The2016federaltaxratesare
asfollows:
15%ontaxableincomeuptoC$45,282
20.5%ontaxableincomebetweenC$45,282andC$90,563
26%ontaxableincomebetweenC$90,563andC$140,388
29%ontaxableincomebetweenC$140,388and$200,000
33%ontaxableincomeover$200,000
Taxesarehigherforhigherincomesandlowerforlowerincomes.Thismakesitmorefairfor
thosewithverylowincomes,whowouldnothaveenoughmoneytopayhighextremelyhigh
taxes.BCsadditionalincometaxesapplytocertaintaxbrackets.Taxbracketsarerangesof
annualincome,andthesetaxbracketsoftenhavetobeadjustedyearlyduetoinflation.

PersonalIncomeTaxBracketsandRates2016TaxYear
TaxableIncome2016Brackets

TaxRate

$0to$38,210

5.06%

$38,210.01to$76,421

7.70%

$76,421.01to$87,741

10.50%

$87,741.01to$106,543

12.29%

Over$106,543

14.70%

Thesetaxesarealsoaccumulative:Ifyourtaxableincomeismorethan$38,210,thefirst
$38,210oftaxableincomeistaxedat5.06%,thenext$38,211oftaxableincomeistaxedat
7.70%,thenext$11,320istaxedat10.5%,thenext$18,802oftaxableincomeistaxedat
12.29%andanytaxableincomeover$106,543istaxedat14.70%(ProvinceofBritish
Columbia).Itisalsoimportanttonotethattherearebenefitstofilingataxreturn,asyougetall
ofyourtaxesbackifyoumakelessthanthepersonaltaxexemptionamount.Also,the
CanadianPensionPlan(CPP),isalifetimeearningsprogram,whichmeansthattheearlieryou
contribute,themorepensionyouwillgetafterretirement.


Thekeytotaxesisunderstandinghowthepaperworkworks.Thiscanbeoneofthe
hardestthings,andassuch,alotofpeoplelooktoincometaxspecialiststocompletethisfor
them.However,Ithinkwithabitoflearningandpractice,itissomethingthatcanbedone
withouttheneedofanincometaxspecialist.Therearenumeroustaxformsthatyouwillface,
eachonethatwillappearforeign.Forexample,whenyougetajob,aTD.1formwillhavetobe
filledoutthisformaidsemployeesinsettingtheamountofincometaxtobededucted.Thereis
apaychequestubthatexplainsthedeductionstakenoffofyourtotalincomewhenyouget
paid.YourcompanygivesyouaT4slipinFebruarythatdetailsthemoneyyoumadeandthe
taxesyoupaiditisusedtohelpfileyourincometaxreturn.Thisincometaxreturnisfiledona
T1GeneralForm.Today,youcaneveneasilyfiletaxesonlineaswell.Thereareaseriesof
schedulesandprovincialinformationsheets/formsthatmustbefilled.Thereareschedulesfor
federaltaxes,familytaxcuts,workingincometaxbenefits,andmore.Hereisaglimpseofthe
scheduleforfederaltaxes:

Alloftheseformsmustbecompletedaspartoftheincometaxreturn,whichmayseemquite
daunting.However,Ithinkthatwithabitofdetermination,itcanbedone.


Someimportantthingstonote,especiallyforyoungadultsandteens,arethe
exemptionsandspecialrulesthatapply.Firstly,anymoneythatismadefromcasualjobs,such
asmowinglawnsandbabysitting,isconsideredasearnedincome.Assuch,itmustbefiledand
claimedasotherincome.Secondly,knowingaboutclaimingtipsontaxesisvital.Tipsthatare
earnedthroughwork,likeasawaiter,valet,tourguide,etc.,arenotincludedasincomeonthe
T4slip,sinceemployersdonotkeeptrackofsuchinformation.However,thisincomeisstill
taxableandmustbeclaimedwithyourtaxes,accordingtotheCanadianRevenueAgencyand
theIncomeTaxAct.Finally,itisnecessarytounderstandtheimportanceofpayingtaxes.While
payingtaxesmaynotbeentirelygreat,itiscrucialforCanadatobetheamazingcountryitis.
Taxesprovideuswiththeservicesthatweoftentakeforgranted.Taxmoneyisusedbythe
governmenttogiveusthingslikehighways,militaryspending,healthcare,foreignaid,and
more.Withoutmoney,acountrycannotproperlyrunitself.Ifeelasthough,afterknowingthe
benefits,payingtaxesnolongerseemstobesuchaterriblething.Ibelievethatbypaying
taxes,wearecontributingtowardstheveryfoundationofourgreatnationandensuringthat
Canadacontinuestostrivefordecadestocome.

Resources:
http://settlement.org/ontario/dailylife/personalfinance/taxes/whatisthetaxationsystemincana
da/
http://settlement.org/ontario/dailylife/personalfinance/taxes/howmuchincometaxdoihaveto
pay/
http://www2.gov.bc.ca/gov/content/taxes/incometaxes/personal/taxrates
http://www.craarc.gc.ca/E/pbg/tf/5000s1/README.html
http://www.calculconversion.com/salestaxcalculatorbritishcolumbiagstpst.html