The Provincial as well as Federal government in Canada impose tax on individuals who fulfill certain criteria for filing tax returns. The Canada Revenue Agency is responsible for conducting the procedures followed in the taxation system in Canada. Tax rates in Canada is either flat or progressive. The Goods and Services Tax ( 6 percent)exemplifies the flat tax rate in Canada. Irrespective of the income of the business firms, this tax is levied. The Progressive tax system is usually meant for the salaried people. An individual having a higher income is entitled to pay more tax as compared to an individual who has a low income.
The Constitution Act of 1867 empowers the federal government as well as the provincial government in Canada to collect taxes separately. As per s.91(3) of Constitution Act of 1867, the Federal government in Canada imposes tax on the people. However, the tax laws in Canada comprise Income Tax Act, which is the main source of taxation in the country. The other tax laws in Canada governing the taxation system are as follows:
Case Law
Bilateral International Tax Treaties
Income Tax Regulations
Income Tax Application Rules
Role played by the Department of Finance in Canada:
Development of tax policies as well as tax legislation as per norms of the taxation system in Canada are drafted by this department.
Role played by the Department of Justice:
Income tax related litigation pertaining to income tax suits are taken care of by the department of justice.
Role played by the Canada revenue Agency:
The Income Tax Act is enforced as well as administered by the CRA or the Canada Revenue Agency in Canada. The CRA also looks into matters related to tax compliance, collection of taxes and performing audits from time to time.
Tax laws in Canada govern tax imposition on all categories of taxes. As per tax laws in Canada, the “income” is treated differently by various jurisdictions. Owing to its varied definition and as the term “income” behaves as a wide spectrum, availing professional assistance at the time of filing returns may be necessary.
Criteria for imposing taxes in Canada:
Income in Canada is categorized on the basis of its source. Tax laws in Canada apply to the following sources:
Income from:
Capital gains
Employment
Property
Business
Sudden monetary gains coming from lotteries are subject to taxation , the exception being money that is earned through gambling. Similarly, income from inheritance as well as gifts received do not fall into the tax net in Canada.