Lesson 23 — Activity 1: Income Tax
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Lesson 23 — Activity 1: Income Tax
Warm Up
Income tax
is something that all working Canadians must pay to the government. In this activity, you will learn about the history of
income tax
and why it is important. You will also learn about hidden taxes.
@creativecommons
What are taxes? Taxes are sums of money demanded by a government for its support or for specific facilities or services and taken from incomes, property, sales, etc.
There are different types of taxes. In this activity, you will learn about income taxes and hidden taxes.
History of Income Tax in Canada
In 1917, the federal Government of Canada needed to raise more money because in August 1914, Canada had declared war on Germany. To raise the extra money, the Canadian Parliament voted to tax people directly on their income. This was to be only a temporary tax. Money was needed to fight the war, but the finance minister said that when the war ended, the tax would be "reviewed."
As we all know, income tax is still with us. After the war, the government had to build hospitals, look after soldiers who had been wounded, and pay pensions. In other words, it still needed more money, so it kept the tax.
@creativecommons
Taxes are now administered by a group called the Canada Revenue Agency.
Each year, people who are Canadian residents complete an income tax
return.
On
this form, you list your income, deductions, and tax credits so
you can calculate your share of taxes payable. This money is usually
deducted from your paycheque each month and paid to the federal
government.
@creativecommons
You may think that, as a teenager, you do not pay any taxes, or you may think that GST is the only tax that you pay. However, you pay more taxes than you think. During 2013–14, the federal government recorded $271.7 billion in revenues. That is a lot of money!!
These revenues came from:
Personal income tax — $130.8 billion, or 48 cents of every dollar raised in revenues.
Corporate income tax — about $36.6 billion, close to 14 cents of every dollar.
Goods and Services Tax (GST) — $31.0 billion, or 11 cents of every dollar.
@creativecommons
There are a number of other
taxes — such as customs import duties and indirect taxes that are often
referred to as "hidden" taxes on fuel, alcohol, and tobacco, just to
give a few examples. Take a look at the table on the left. This shows how much the Canadian government earned in taxes from fuel, tobacco, and liquor (in millions) in 2014 and 2015.
Personal income tax — $130.8 billion, or 48 cents of every dollar raised in revenues.
Corporate income tax — about $36.6 billion, close to 14 cents of every dollar.
Goods and Services Tax (GST) — $31.0 billion, or 11 cents of every dollar.
@creativecommons
There are a number of other
taxes — such as customs import duties and indirect taxes that are often
referred to as "hidden" taxes on fuel, alcohol, and tobacco, just to
give a few examples. Take a look at the table on the left. This shows how much the Canadian government earned in taxes from fuel, tobacco, and liquor (in millions) in 2014 and 2015.
Hidden taxes are included in the price of products when you buy them, so the consumer does not really know what portion of the price includes such taxes. Another source of revenue is from such things as licences, registrations, etc. If you fly, your ticket includes several fees for things such as security, airport development, etc. If you fish in a national park, you must get a specific licence for the national park. So, as you can see, you are paying taxes on many different things!
The money you pay in taxes goes to many places. In addition to paying the salaries of government workers, your tax dollars also help to support common resources, such as police and firefighters. Tax money also helps to ensure the roads you travel on are safe and well maintained. Taxes fund public libraries and parks. Taxes are also used to fund many types of government programs that help the poor and less fortunate, as well as many schools. So, as you can see, paying taxes is important. Citizens often complain about taxes they pay at the till, off of their paycheques, and at income tax time each year, but in the end, they wouldn't want their standard of living to go down.
Self-check!
Try This!
Try the question below on your own first, and then click on the tab to check your answers! You can look back in the lesson to find the answers.
Answer the following questions based on what you learned in this activity.
- When did income taxes begin in Canada?
- Why were income taxes brought in?
- Were income taxes supposed to be temporary or permanent?
- Taxes in Canada are now administered by which group?
- Income taxes began in Canada in 1917.
- Income taxes were brought in to pay for the war.
- Income taxes were supposed to be temporary, but they have continued until this day.
- Taxes in Canada are administered by the Canada Revenue Agency.