Benjamin Franklin (1789) once said that there are only two certainties in the world: death and taxes. Tax policies are critical to all countries, whether they be developed or developing countries. A tax policy can boost economic development and reflect the views of citizens. In Canada, personal income tax (PIT) is the largest source of revenue for the Canadian government and accounts for almost half of federal government revenue (Statistics Canada, 2010). Figure 1 shows different types of tax revenue as a percentage of GDP in Canada. It shows that a significant proportion of Canadian GDP is composed of PIT. Tax has become a large portion of Canadian family’s expense, which has become a burden to some families. In fact, Lammam (2016) notes that taxes account for 42.4% of an average Canadian family’s income, more than the 37.6% spend on food, clothing, and housing combined.
In 2016, the Canadian federal government introduced a new income-tax bracket that reduced middle-class income tax. Consequently, those making between $44,701 and $89,401 and were paying 22% are now only paying 20.5%. However,
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One of the reasons is that understanding the relationship between labor supply and personal income tax is an effective way to evaluate the efficiency of government tax system and deadweight loss of taxation. Mirrlees (1971) addresses optimal taxation, noting that there are advantages and disadvantages to income tax. While governments need tax as revenue to support disadvantaged groups and social services, income tax also causes a decline in aggregate output as it decreases people’s work hours. To minimize the welfare loss, he developed a model for finding the optimum level of taxation and government expenditure. Subsequently, research on individuals’ decision on hours of work based on the government tax system has become one of the focuses of economists who want to study labor
In general, it can be said that the tax system in the United Kingdom attempts to reduce inequality and poverty, although it is seen by many as an unclear and unfair system. Tax scams and other avoidance measures are symptoms of a wider malaise in a regime that need to be more transparent and fairer (Telegraph View, 2014). However, for those in lower pay employment, its effectiveness can be seen through the income tax, which will deduce between 10% and 20% of their final income, compared to 40% to 50% of those in higher pay. In addition, measures such the national minimum wage and benefits in-kind guarantee that individuals in lower pay are provided with a minimum standard of payment as well as services that might not be easily accessible for them as much as there are accessible for wealthy people.
Hall, A. (2001, August). The Flat Income Tax and the Fair Tax Consumption Tax: A
Introduction: In the year 1862 during the civil war congress implemented the first income tax in America. It was 3% per year. However, it was not until 1913 when the 16th Amendment to the Constitution was passed, which granted the government the ability to impose a tax on individuals’ income. Since then it has been an issue to determine how much people should be taxed. Tax rates in America change drastically; for example, in 1963 a person in the highest tax bracket would give 90.8% of their income to the government. In contrast, that same person would only pay 28.0% in 1988. The tax rate for income tax is an issue because for every dime that someone pays in taxes is one dime that they are not able to spend themselves. Additionally, people
Taxation levels are very complicated for Canadian citizens. I believe that Canada will economically break free when taxation levels become less onerous.
Poverty is a serious issue in Canada needs to be addressed promptly. Poverty is not simply about the lack of money an individual has; it is much more than that. The World Bank Organization defines poverty by stating that, “Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor. Poverty is not having access to school and not knowing how to read. Poverty is not having a job, is fear for the future, living one day at a time”. In Canada, 14.9 percent of Canada’s population has low income as Statistics Canada reports, which is roughly about two million of Canadians in poverty or on the verge of poverty. In addition, according to an UNICEF survey, 13.3 percent of Canadian children live in poverty. If the government had started to provide efficient support to help decrease the rates of poverty, this would not have been such a significant issue in Canada. Even though the issue of poverty has always been affecting countries regardless of the efforts being made to fight against it, the government of Canada still needs to take charge and try to bring the percentage of poverty down to ensure that Canada is a suitable place to live. Therefore, due to the lack of support and social assistance from the government, poverty has drastically increased in Canada.
Canadian Centre for Policy Alternatives, Alternative Federal Budget 2011, Report: Rethink, Rebuild, Renew (pg. 69, 70, 72, 75) Retrieved from: http://www.policyalternatives.ca/AFB2011
Taxation has always been a major controversy. Just like any major corporation, the government is constantly looking to raise revenue. The easiest and fairest way to do this is by taxing the people. However, how the people will be taxed is always an issue.
The use of taxes is one of the government's favorite ways to make its presence known in the economy. While this method seems blatantly obvious, many of the ways the government uses the money collected by taxation is not. Some of the money it takes is used to fund other programs designed to "protect" consumers and to "create" jobs. Be...
The purpose of this paper is to illustrate the layout of taxation. I will differentiate the types of taxes and the roles that they serve currently. Subsequently, I will explain what equity, efficiency, effectiveness and transparency (EEET) are and show how they apply to taxation as a whole. Lastly, I will conclude how the EEET applies to the four tax types.
The famous literature on principles of taxation was embodied in Adams Smith “Canons of taxation”. Since then, economies have adopted (and adapted where necessary) these basic principles for what is regarded as the most important tool of fiscal policy.
The government use of taxes plays a crucial role in today’s economy as well as personal finances, it has and will continue to leave its mark on the world we live in.