Government RevenueGovernment Revenue

Economics 120Economics 120

There is a saying that There is a saying that only two things in life only two things in life are certain: death and are certain: death and

taxes.taxes.

Government RevenueGovernment Revenue

Tax: money paid to a government to Tax: money paid to a government to fund its programs and services.fund its programs and services.

The taxation powers of the The taxation powers of the government are contained in the government are contained in the Constitution Act, 1867. Constitution Act, 1867. gives unlimited taxing powers to the gives unlimited taxing powers to the

federal government, but restricts the federal government, but restricts the provincial government to collecting only provincial government to collecting only direct taxes.direct taxes.

Government RevenueGovernment Revenue

Direct Tax - imposed on the person Direct Tax - imposed on the person who is intended to pay the tax who is intended to pay the tax Example: Income taxExample: Income tax

Indirect Tax - levied against one Indirect Tax - levied against one person in the expectation that it will person in the expectation that it will be paid by another person be paid by another person Example: Excise taxExample: Excise tax

Federal Government RevenueFederal Government Revenue

Personal Income Tax (about 46% of Personal Income Tax (about 46% of gov’t revenue)gov’t revenue)

Corporate Income TaxCorporate Income Tax Other taxes Other taxes

excise taxes, customsexcise taxes, customs Non-tax sources Non-tax sources

profit from Crown corporations, social profit from Crown corporations, social assistance payments, interest on loans, assistance payments, interest on loans, revenue from licensesrevenue from licenses

Provincial Government RevenueProvincial Government Revenue

Personal Income TaxPersonal Income Tax Corporate Income TaxCorporate Income Tax Sales TaxSales Tax Excise Taxes Excise Taxes

alcohol, cigarettes, gasolinealcohol, cigarettes, gasoline Property Taxes (municipal Property Taxes (municipal

governments)governments)

Provincial Government RevenueProvincial Government Revenue

Equalization Payments: payments to Equalization Payments: payments to provinces to ensure it can provide a provinces to ensure it can provide a reasonable level of public services without reasonable level of public services without resorting to extremely high levels of resorting to extremely high levels of taxationtaxation 2000-2001 – $5689/person2000-2001 – $5689/person

Stabilization Payments: meant to ensure Stabilization Payments: meant to ensure that provincial taxation revenues do not that provincial taxation revenues do not fall substantially from one year to the fall substantially from one year to the next.next.

Approaches to Tax CollectionApproaches to Tax Collection

Progressive TaxProgressive Tax – the percentage of – the percentage of income an individual pays in taxes income an individual pays in taxes increases as the individual’s level of increases as the individual’s level of income increases.income increases.

Proportional TaxProportional Tax – the percentage of – the percentage of income paid in taxes remains income paid in taxes remains constant regardless of an individual’s constant regardless of an individual’s level of income.level of income.

Approaches to Tax CollectionApproaches to Tax Collection

Regressive TaxRegressive Tax – the percentage of – the percentage of income paid in taxes decreases as income paid in taxes decreases as the level of income increases.the level of income increases.

Note: Regardless of which approach Note: Regardless of which approach is used, individuals with more income is used, individuals with more income will pay more in income taxes. In will pay more in income taxes. In Canada, the progressive form of Canada, the progressive form of taxation is used on income.taxation is used on income.

Federal Revenue 2002Federal Revenue 2002

Personal Income Tax

Corporate Income Tax

Payments to non-residents

General Sales Tax

Gas/Auto Tax

Alcohol/Tobacco Tax

Customs

Other Consumption Tax

Health and Social Insurance

Investment Income

Sales of goods/services

Misc Taxes

Other Revenue

Federal Gov’t SpendingFederal Gov’t Spending

Social ServicesSocial Services Old age security, child tax benefit Old age security, child tax benefit

program, EI, welfare, veteran’s benefitsprogram, EI, welfare, veteran’s benefits DebtDebt EducationEducation Foreign AffairsForeign Affairs HealthHealth TransportationTransportation

Federal Gov’t Spending 2001-2Federal Gov’t Spending 2001-2

Social Services

Debt

Protection

Industrial Development

General Services

Education

Foreign Affairs

Recreation/Culture

Labour, Employment, Immigration

Research

Health

Transportation/communications

Housing

Environment

Planning/development

Other

Provincial and LocalProvincial and Local

HealthHealth EducationEducation Social WelfareSocial Welfare Debt PaymentsDebt Payments

Provincial Gov’t Spending 2001-2Provincial Gov’t Spending 2001-2

Health

Education

Social Services

Debt Charges

Industrial Development

Transportation/communications

Protection

General services

Transfers

other