The government of Canada provides numerous publicly-funded services for Canadians, such as healthcare, education, roads and clean water, and many other benefits; these are paid for with a variety of provincial and federal taxes.
Every Canadian resident who earns over $9,000 per year must report their income (worldwide) to the Canada Revenue Agency, the government body responsible for taxation. If you have worked and earned money in Canada, your employer will have withheld a portion of your salary for payment of taxes. If too little was withheld, you will need to pay more. If too much was withheld (this is more typically the case), you will receive a refund of the overpayment. It is important to file your taxes each year, if you live in Canada (no matter your status here, unless you are a true visitor or tourist), even if you don’t earn any money. Filing enables you to apply for certain tax benefits such as the Canada Child Tax Benefit, and the GST/HST Credit.
Employment Insurance Premiums
A certain percentage of your Canadian salary is paid to Employment Insurance (EI), which is a program that may provide you with benefits should you become unemployed.
Canada Pension Plan Premiums
The Canada Pension Plan (CPP) is an employer-matched insurance program designed to provide for you in your retirement. Everyone between the ages of 18 and 70 who is employed must contribute to the plan. CPP can also provide income if you become disabled and benefits could be paid to your family if you become deceased.
Goods and Services Tax (GST)/Provincial Sales Tax (PST)/Harmonized Sales Tax (HST)
In British Columbia, you are charged a certain amount of sales tax on most items and services that you purchase. HST (formerly GST, Goods and Services Tax, 5% + PST, Provincial Sales Tax, 7%), the new Harmonized Sales Tax, is a blended sales tax of 12%. The new premier of BC, Christy Clark, has been responsible for new legislation committed to reducing the amount of HST paid by British Columbians. By 2012, HST will be reduced to 11%, and to 10% by 2014. As of this month, this legislation is up for popular vote, and if British Columbians vote to keep the HST (voting NO), the current legislation will remain in place and residents will see their sales tax reduced to 10% in 3 years’ time.
If residents vote to do away with the HST (voting YES), the former system of GST + PST will be re-instituted and residents will continue to pay a combined 12% on certain items (but PST was not paid on many items, making the tax only 5% on those particular items), but still reducing tax overall. Either way seems viable for paying less tax.
GST was, at one time, refundable upon leaving the country (for visitors only), but the Government of Canada eliminated this GST/HST Visitor Rebate Program, effective April 2007.
Some items already have an additional tax incorporated into their purchase price, such as tobacco and gasoline.
Some items are taxed at a different rate:
- Liquor is taxed at 10%
- Hotel rooms are now taxed at 12%
- Vehicles are now taxed at 12%
- A carbon tax is levied on all fuels at point of purchase
There is a helpful publication put out by CRA entitled “Are You a Newcomer to Canada,” and this helps to explain the complexities of Canada’s tax system. It can be downloaded here: http://www.cra-arc.gc.ca/E/pub/tg/t4133/t4133-e.html.