Documente Academic
Documente Profesional
Documente Cultură
Taxable Entities
Individuals Corporations Trusts
Federal/Provincial System
Individual with Taxable Income of $20,000
Federal Tax - @ 15% Provincial Tax (Assumed) - @ 7% Total $3,000 1,400 $4,400
Federal/Provincial System
Public Corporation With Taxable Income of $100,000
Federal Tax - @ 21% Provincial Tax (Assumed) - @ 13% Total $21,000 13,000 $34,000
Economic Objectives
Resource Allocation
Distribution Effects
Stabilization Effects Fiscal Federalism
Progressive Systems
Regressive Systems
Tax Incidence
Tax Assessed On Corporation Who Pays?
Shareholders?
Customers?
Tax Expenditures
Examples (2010 Estimates)
Charitable Donations $3.0 Billion RRSP Deductions - $9.8 Billion Capital Gains - $4.0 Billion Exempt Principal Residences $5.7 Billion
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Tax Expenditures
Reasons For Use
Less Costly To Administer Reduce Visibility Reduce Progressivity
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Part I
Division A - Liability For Tax (Chapter 1) Division B - Net Income For Tax Purposes
Subdivision a Employment (Chapter 2) Subdivision b - Business And Property (Chapters 4, 5, and 6) Subdivision c - Taxable Capital Gains/Allowable Capital Losses (Chapter 7) Subdivision d - Other Sources (Chapter 8) Subdivision e - Other Deductions (Chapter 8)
Division C - Taxable Income (Chapters 3 and 10) Division E - Tax Payable (Chapters 3 and 10)
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Court Decisions
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Taxation Of Non-Residents
Employment income earned in Canada Income earned by carrying on a business in Canada
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Taxation Of Non-Residents
Disposition Of Taxable Canadian Property
Canadian real estate Capital property used by a Canadian business Shares of Canadian private companies Some partnership interests
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Concept Of Income
Economists View
Not Very Specific Based On Wealth Or Assets
Accountants View
Recognize Revenue Match Expenses GAAP Based
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Concept Of Income
CRA View
Employment Income Business Income Property Income Net Taxable Capital Gains Other Inclusions And Deductions
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Only individuals
Rarely negative
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ITA 3(c) Subtract Subdivision (e) Deductions From The Sum Of ITA 3(a) And 3(b)
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Includes
Excess, if any, of Taxable Capital Gains over Allowable Capital Losses If losses greater than gains in current year, this amount is nil Stated alternatively, allowable losses can only be deducted to the extent of taxable gains.
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Example Solution
Net Income For Tax Purposes
ITA 3(a) Employment Income ITA 3(b) - TCG Less ACL Subtotal Subdivision e Deductions ITA 3(c) ITA 3(d) - Business Loss Net Income For Tax Purposes $58,000 8,000 $66,000 ( 3,000) $63,000 ( 23,000) $40,000
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Tax Planning
Income Splitting
Based on progressive rates A given sum allocated to more individuals results in lower aggregate tax payable Generally involves family members
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Tax Planning
Income Splitting (2009 ignoring credits)
A. No Splitting
$505,056 Income Taxes = $136,570
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