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Lecture

ADMS - 3520 Chapter #1-2 Notes.docx

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Department
Administrative Studies
Course Code
ADMS 3520
Professor
all

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ADMS3520 Lecture 1 Chapter 1 NotesIntroduction To Federal Taxation In CanadaThree types of entities are subject to federal income taxation These are Individuals human beings Corporations and TrustsFor income tax purposes unincorporated business such as partnerships and proprietorships are not viewed as taxable entities Rather income earned by an unincorporated business organization is taxed in the hands of the proprietor or the partnerAll 3 types of entities are required to file income tax returnsThe return for an individual is referred to as a T1 for a corporation a T2 and for a trust a T3 Proprietorships and partnerships are not required to file income tax returnsUnder the federalprovincial tax collection agreement provincial taxes are calculated by applying a provincial tax rate to a Taxable Income figure With the exception of Quebec all of the provinces use the same Taxable Income figure that is used at the federal levelCorporate Income Taxes The system used to calculate provincial corporate income tax payable is similar to the system that is applicable to individuals All of the provinces with the exception of Alberta and Quebec use the federal Income Tax Act to compute Taxable Income Even in Alberta and Quebec the respective provincial Tax Acts have many of the same features as the federal ActWith respect to the collection of corporate income taxes only Alberta and Quebec collect their own corporate income taxes In all other provinces and territories corporate income taxes are collected by the federal government on behalf of the provincesTax Policy Concepts Resource AllocationTax revenues are used to provide public goods and services Pure public goods such as the cost of our national defense system are thought to benefit all taxpayers Similar allocations occur with such widely used public goods as education health care and pollution controlDistribution EffectsOur tax system is used to redistribute income and wealth among taxpayers Such provisions as the federal GST tax credit and provincial sales tax exemptions on food and low priced clothing have the effect of taking taxes paid by higher income taxpayer and distributing them to lower income wage earners or taxpayers with higher basic living costs in proportion to their incomeStabilization EffectsTaxes may also be used to achieve macroeconomic objectives At various times tax policy has been used to encourage economic expansion increase employment and to assist in holding inflation in check An example of this is the emphasis on stimulating the economy that is found in the last two budgetsFiscal FederalismThis term refers to the various procedures that are used to allocate resources among different levels of government Sales taxes generally fall into regressive category as lower income individuals spend a larger portion of their total income and as a consequence pay a greater portion of their total income as sales taxes levied on their expenditures
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