Income Tax in Canada

Income Tax in Canada

Income Tax in Canada

The Canadian tax system includes the federal taxes, provincial and territorial taxes and the municipal taxes. As stated in the income tax act; the Canadian Revenue Agency (CRA) administers the federal tax system and hence is responsible for collection of income tax revenues in most provinces. These taxes can be paid through monthly deductions, installments, direct payments and clearing of tax arrears.

In Canada, the income tax calculations are progressive in nature; hence the higher the income, the higher the taxation. This is made possible by the tax bracket system whereby tax rates are grouped according to a person’s level of income (The financial intern, 2002). However, it should be noted that the rates apply to the amount of money that lies within the given bracket. In addition, an individual’s total income tax must include both the federal taxation rates and the provincial tax rates.

At the end of the given taxation year, taxpayers are expected to file for income tax returns at the CRA. Filing for tax returns would enable the agency to evaluate the amount of tax liability an individual has through analysis of the incomes. In this case, individuals who overpaid taxes would be refunded while those with underpayments would be expected to clear their tax arrears.  In the event of unsatisfactory verdict from the CRA, a taxpayer has the freedom to formerly appeal the evaluation decision. This appeal would then be handled by the appeals department of the CRA of which re-evaluation of the tax would be made. However, if the evaluation decision is upheld; the taxpayer can file a case in the tax court of Canada and then to the federal court of Appeal.

In conclusion, the Canadian income tax system is not orderly but also ensures that low income earners pay relatively lower revenues to the government. In addition, the income tax system provides for fair assessments, proper judicial procedures and tax refunds to tax payers.

Reference List

The financial intern (August, 2012). A simplified explanation of the Canadian income tax system. Retrieved from http://thefinancialintern.wordpress.com/2012/08/26/a-simplified-explanation-of-the-canadian-income-tax-system/