Transcript - Newcomers to Canada and the Canadian Tax System, Segment: The Canadian tax system

Host: Welcome to the segment called The Canadian tax system, part of the Newcomers to Canada and the Canadian Tax System video.

With me is Sarah Taylor. Welcome Sarah.

Subject matter expert: Thank you Kathleen.    

Host: What can you tell me about the Canadian tax system?     

Subject matter expert: Canadian tax is collected by three different levels of government: Federal, provincial or territorial, and municipal.

Each level of government is responsible for certain taxes. The taxes represent their main source of revenue.

Host: Why do we pay taxes in Canada?

Subject matter expert: Many of the benefits Canadians enjoy are made possible through taxes. Canada's tax system pays for roads, schools, health care, social security, and public safety among other things.

Tax revenue is used to deliver benefits to lower income families, charities, students, seniors, and persons with disabilities.

Tax revenue provides social benefits such as old age security, the Canada child tax benefit, the working income tax benefit, the universal child care benefit, and the goods and services tax/harmonized sales tax credit.

Host: Could you tell me what kinds of taxes there are in Canada?

Subject matter expert: The Canadian tax system includes: federal; provincial and territorial; and municipal taxes. Canadian residents support the tax system by paying their fair share of taxes. In return, they benefit from the programs and services provided by their governments.

The Canadian tax system is based on a self-assessment system, which means that every taxpayer is responsible for making sure that they comply with the tax rules of each level of government.

Host: Which taxes do the federal, provincial, and territorial governments collect?

Subject matter expert: The federal government levies tax nationally, and the provincial and territorial governments levy tax within their own boundaries. Personal and corporate income tax is levied at the federal level and at the provincial and territorial level.

The CRA collects, assesses, audits, and enforces federal, provincial, and territorial personal and corporate income taxes; except for the Province of Quebec regarding personal and corporate provincial tax, and the Province of Alberta regarding corporate provincial tax.

Host: Are there any other taxes that the CRA collects on behalf of the federal government? 

Subject matter expert: Yes. The CRA also collects a value-added sales tax called the goods and services tax or GST, and in some provinces the harmonized sales tax or HST. The consumer pays the tax and businesses are generally responsible for collecting and remitting it to the CRA.

When you buy goods or services where GST/HST is applicable, the amount of tax you paid is generally shown on the receipt, invoice, or contract you received from the purchase or there will be a sign to tell you that the price of the supply includes the GST/HST. The CRA also collects excise taxes on certain manufactured goods, and levies excise duties on products such as cigarettes, alcohol, and gasoline.

Revenu Québec collects the GST in Quebec on behalf of the federal government.

Host: Who pays taxes in Canada?

Subject matter expert: The Canadian tax system is based on residency. Canadian residents pay taxes on their income from all sources, both inside and outside of Canada, and non-residents of Canada pay taxes only on their income from Canada.

Host: What types of income are taxable?

Subject matter expert: Generally, most types of income you receive are taxable, and you have to report them on your income tax and benefit return.

Some of the common types of income a Canadian resident may receive are: employment income; self-employment income; tips and gratuities; occasional earnings; investment income; and universal child care benefit payments.

This is a general list. For more information on taxable income, go to the CRA webpage on that topic. The link is included in the Related links for this segment.

Host: When I got my first pay cheque I thought I would receive the full amount I earned. Instead of receiving all of my pay, I noticed that there were some deductions for Canada Pension Plan contributions, employment insurance premiums, and income tax. Is my employer responsible for doing that?

Subject matter expert: Employers and payers must deduct federal, provincial, and territorial taxes, Canada Pension Plan or Quebec Pension Plan premiums, employment insurance premiums, and other contributions from the gross pay amount. Then the employee is paid the balance.

Employers must provide employees with a pay stub that shows the amounts that have been deducted.

Employers cannot keep the money they deducted from their employees pay; they must send the amount to the CRA.

Host: How do I know how much has been deducted from my pay throughout the year?

Subject matter expert: Employers are responsible for keeping records of deducted amounts under their employees' social insurance numbers or SINs. These amounts are generally provided to you on your pay stub.

Employers have to issue information slips to you and the CRA, such as T4s or T4As, with the amounts earned and the details of deductions such as: income tax; employment insurance premiums; Canada Pension Plan contributions; and Quebec Pension Plan contributions by the last day of February following the calendar year to which the deductions apply.

Host: What do I use these information slips for?

Subject matter expert: You use the information on these slips to help you complete your income tax and benefit return and calculate your tax obligations.

For more information about the Canadian tax system, go to the CRA webpage at www.cra.gc.ca/educators, and select Learning About Taxes. The link is included in the Related links for this segment.

Host: Thank you Sarah.

This concludes the segment called The Canadian tax system, part of the CRA's Newcomers to Canada and The Canadian Tax System video.

Thank you for watching.

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