Conference kaosws::canada

    Federal Income Tax rates are divided into three brackets, there is also
    a surtax that applies to the upper two brackets. The tax rate at the
    middle bracket is, if memory serves me right, 18% after deductions.
    Provincial Income Tax varies by province, most provinces are integrated
    with the Federal system and base their taxes on a percentage of the
    federal tax (in Ontario for example, income tax is 53% of federal tax
    before the surtax is applied). In Quebec you must submit a separate return.
    
    There are other taxes as well, the Federal Government charges a 7%
    value added tax (called the GST), most provinces also have a sales tax
    on some goods (8% in Ontario). Both Federal and Provincal governments
    also tax Gasoline, Booze and Tobacco.
    
    The mortgage system has a few differences. Mortgage rates, as all
    interest rates, are higher here. The main difference is that most
    mortgages here are compounded semi-annually as opposed to monthly this
    tends to make our rates look even higher. The same basic mortgage classes 
    exist (Open vs. Closed, 25 or 30 year amortiziation, renewal periods from 
    6mo. to 5 years) but because of the competative nature of the mortgage 
    market these days virtually anything is possible.

    The Canadian Income Tax system is certainly complex; there is both
    Federal and Provincial income taxes and the amount you pay of each
    does vary depending on where you live in the country.  The amount is
    based on residence and not work ... so for example, I live in Ontario
    and work in Quebec ... so pay Ontario tax.
    
    The system is pay as you earn with annual reconcilliation, unlike the
    UK system which provides on-going reconcilliation.
    
    There are essentially 3 rates of federal tax but to explain how they
    work and how the deductions work gets very complex ... add to that
    a minimum tax for high incomes.
    
    Provincial taxes (except for Quebec) are all a percentage of Federal
    Tax (usually a little over 50%) but there are usually provincial tax
    credits that offset some of teh provincial taxes.
    
    Typically, for a middle income earner ($35 - 50k per year), married
    with 3 children, he is looking about 27% of gross in income tax.
    Single and no children will increase that to probably around 33%.
    
    On top of that there are also these taxes ...
    	Unemployment insurance ... about $900 per year 
    	Canada Pension Plan Contributions around 700 per year.
    
    And then these sales taxes ...
    	Provincial sales tax ... typically 8% on goods
    	GST		     ... 7% on most goods and services except food
    				 and financial services.
    
    There are no local (city or town) sales taxes ... although there are
    local hotel room taxes.
    
    There are also municipal taxes on home owners and in most urban
    communities for a moderate sized home you are looking at around
    $3000 per year.
    
    
    Mortgages in Canada normally are set up for a 25 year amortization
    (time to pay off), and the interest rates are set for periods of
    from 6 months to 5 years (although there are a few institutions
    that offer 7, 10 and 25 year rates).  This period is known as the
    Term.  Most mortgages are closed during the term ... which means that
    you cannot pay them off or pay them off without penalty.  6 month
    and one year mortgages are often offered fully open ... ie. you may pay
    them down in part or in full at any time during the term.
    
    A closed mortgage does not lock you in completely, inasmuch as you can
    still sell the house and the new buyer can elect to assume your
    mortgage, or you can take your mortgage with you to a new house.
    
    Current rates vary from about 8% for a one year term to about 9.5%
    for a 5 year term.  Note that mortgage interest (or any other interest,
    except on money borrowed for investment) is deductible from taxes.
    On the other hand capital gains taxes are not payable on the sale
    of your principle residence.
    
    These rates are calculated semi-annually, not in advance, compounded
    over the payment period which may be weekly, bi-weekly, semi-monthly
    or monthly depending on the lender's offerings.  Note for a number of
    lenders, payments other than monthly result in shorter amortizations
    than requested, others offer true values.  This is different that the
    US method of quoting interest where for example 6% per year would be
    1/2% per month.  Here 6% per year = 3% per 6 months (semi-annually)
    .48% (compounded monthly).  Thus our equivalent rate will look about
    1/2% higher than the US rate carrying the same payment.
    
    

    Does anyone know when "TAX FREEDOM" day is this year? You know that
    wonderful day when we stop working for the government and start earning
    money for ourselves.
    
    With the GST and other new taxes it must be getting close to the middle
    of July.
    
    Philip
    

    It was just a few days ago, heard "today is tax freedom day" item on
    the radio within the last couple weeks. For some reason June 10th sticks 
    in my head.

	Re: .1 and .2

	Thanks a lot for the detailed info. Just one more question. What are the
	three tax ranges and what is thepercentage of each? From .2 I understand
	that for a $35K-50K range, the tax is between 27% and 33%, depending on
	family size. What are the other two ranges?

	Robi.

    It's not that simple ...
    
    What I quoted to you is how much a typical paycheck will lose to tax.
    
    Tax is calculated on total income less a few deductions that are either
    small or don't apply to most people ... so essentially your gross
    income is your taxable income ...
    
    Then on the first 28,784 the tax rate is 17%
         on the next  28,784 the tax rate is 26%
         on the remainder the tax rate is    29%
    
    This gives total tax ... then subtract from this Federal Tax Credits
    of 17% of   $6,280 for yourself
    		$5,233 for your wife
         approx	$  800 for each child
         approx $    ? for charitable doantions to registered charities
    
    This gives Basic Fedral Tax
    
    Add 5% of BFT as a Federal Surtax
    Add 5% of BFT in excess of $12,500 as additional Federal Surtax
    
    (then for Ontario residents)
    Add 53% of BFT as Ontario Income Tax
    Add 12% of OIT over $10,000 as Ontario Surtax
    Deduct small amounts for Ontario tax reduction for low earners
                         and Sales Tax and Home tax reduction if
                         applicable.
    
    There are other ways to increase and reduce your taxes like own stock,
    run a self-employed business, own a farm etc ...
    
    The bottom line is that you tend to lose a good quarter of income to
    income taxes and about half to all taxes and duties ...
    
    Stuart

Stuart,

Do you always carry a tax guide around with you?

/M

    No, but someone gave me a 123 worksheet for the 1991 tax year and it is
    on the system!  Other than that, it's like the rest of this job in
    the CSC ... how much relative trivia can you remember and how many
    pointers to relative trivia can you find! :-)
    
    Stuart