Redistributive of Effects of Income Taxation in Canada

Redistributive Effects of

Income Taxation in Canada

By Philipp Muedder (i419605)

Agenda•Problem Statement

• History of Income Tax

• Federal Government Revenues

• Provincial Income Tax

• Canada Income Tax System

• Measure of Progressivity

• Conclusion

Problem Statement

‘How does the current personal income tax system support the progressivity and

therefore the redistributive effects of personal income tax within Canada?’

History of the Income Tax

Prior to World War 1

No income taxes on personal as well as corporate

Trying to attract immigrants

During and after the War

High expenses led to the Income War Tax Act in 1917

Tax remained even though it was meant to be temporary

History of the Income Tax

Federal Government Revenue

Income taxes make up about 70% of total Government Revenue

Government highly dependent on Taxes

• All provinces have separate income taxes on top of the federal income tax rate

• Quebec is the exception

Provincial Taxation

The Canadian Bracket System• Example shows the Ontario tax rate

• Is a system that uses progressivity

• Rich people pay more and poor people less taxes

In line with the Ability – to – pay principle

Measures of Progressivity

The Lorenz Curve

Graphical Tool

Straight line shows perfect equality

Inequality is shown by line below the diagonal one

Measure of Progressivity

Gini Coefficient

Numerical approach

Takes minimal value of 0

Maximum value of 1

Canada among the top 3

On right track with redistribution

‘How does the current personal income tax system support the progressivity and therefore the redistributive effects of personal

income tax within Canada?’

Conclusion

Conclusion

Closing the Gap of Income Inequality

Gini Coefficient suggest Canada is on the right path

Tax brackets are adjusted annually for progressivity

Thank you for listening

Any Question?