Canada

Canadian tax system started in 1917 with a simple document of around 40 pages (The Income War Tax Act) and 4% taxes on all income of single people over $1,500 and 2-25% for annual income of married people over $6,000. Nowadays, Canadian tax system is more complicated and is based on Income Tax Act, which consists of more than 3,000 pages in both languages.

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. Federal, provincial, and territorial taxes, Canada Pension Plan or Quebec Pension Plan premiums, employment insurance premiums, and other contributions must be regularly deducted from the gross taxable income amount. To easily manage the information and payments (who pays to whom, what, how, and when), every resident in Canada has a social insurance number (SIN) for reports and records.

Each level of government is responsible for certain taxes, and that is the reason each person pays three types of taxes: federal, provincial or territorial, and municipal. 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.

There is a special agency, Canada Revenue Agency (CRA), that administers tax law for the Government of Canada. 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.

After collecting the taxes, the government pays for roads, schools, health care, social security, and public safety among other things. Tax money is also used to deliver benefits to low-income families, charities, students, seniors, and persons with disabilities. Tax revenue provides social benefits such as Old Age Security, the Canada Child Benefit, the Working Income Tax Benefit, the Universal Child Care Benefit, and the Goods and Services Tax/Harmonized Sales Tax Credit.

For more information about the Canadian tax system, go to the CRA webpage at cra.gc.ca/educators and select Learning about Taxes.