Increases in Canada`s marginal tax rates at the federal and provincial levels from 2009 to 2019 have placed the country at a greater competitive disadvantage when it comes to attracting and retaining skilled labour and, less directly, investment and entrepreneurs. Even before the changes, the country`s highest combined tax rates at the federal and provincial levels compared unfavorably with those of the United States and other developed countries. Many Canadians firmly believe that they pay more income tax than their American counterparts. Even politicians in parliament have used this argument to push for lower taxes. But is this really true? Canadian governments have put the country in this non-competitive position, in part to generate more revenue as they struggle with persistent deficits and growing debt. However, tax hikes are unlikely to bring in as much revenue as governments expect, as taxpayers – especially high-income earners – tend to change their behaviour in response to higher tax rates to reduce the amount of tax they could pay. The federal and provincial governments would do well to reverse the upward trend in marginal tax rates for high incomes and lower income tax rates. In addition to federal income tax, a person who resides in a province or territory or who has earned income in a province or territory is subject to provincial or territorial income tax. Except in Quebec, provincial and territorial taxes are calculated on the federal return and collected by the federal government. Prices vary by jurisdiction. Two provinces also levy additional taxes, which can increase the province`s income tax payable. Provincial and territorial taxes are not deductible when calculating taxable federal, provincial or territorial income. In fact, Canada`s ranking in the 2021 International Tax Competitiveness Index has declined and we now rank 20th out of 37 developed countries.
Not surprisingly, the report notes that Canada has above-average capital gains taxes and high personal income taxes compared to other advanced economies. In contrast, countries like New Zealand, Australia and Switzerland have more competitive tax systems due to their relatively low taxes on personal income, capital gains and corporations. Canada`s relatively high tax rate on capital gains is another area of concern. Capital gains tax is applied when individuals or corporations sell assets at a price higher than the original purchase price. Canada`s capital gains tax is higher than that of many of its OECD peers, and many countries, including Switzerland, New Zealand and Hong Kong, have no capital gains tax. Higher taxes on capital gains discourage entrepreneurship, investment and saving in Canada. But in Canada, provincial income taxes (except Quebec) are coordinated with the federal tax system and are based on a percentage of federal tax. This means that the provinces have the same eligible deductions and income rules as the federal system. Each province also has additional loans and incentives. Countries that offer very low tax rates to foreign investors are called tax havens.
Tax havens generate government revenue by attracting a generous inflow of capital and charging fees, levies and low tax rates. With an income of $150,000, again, these are the 10 highest combined tax rates in the 10 Canadian provinces, from 41% in Alberta to 50% in Nova Scotia. Comparing income tax in the U.S. and Canada requires an analysis of the benefits received for these taxes and any other non-tax expenditures. Among many other factors, the individual situation of each taxpayer can help determine whether they are better off financially in one country or another. No discussion of U.S. and Canadian taxes would be complete without comparing the health care systems of the two countries. Income taxes paid by Canadians partially fund the country`s socialized health care system. Under this plan, everyone has equal access to medical facilities, doctors, and procedures at no additional cost.
In the United States, health care must be paid for out of pocket or through health insurance. In this article, we compare three main types of taxes: income tax, corporate income tax, and sales tax. The federal and provincial governments have increased some income tax rates over the past decade. In 2015, the Trudeau government increased the marginal tax rate (again for entrepreneurs, professionals and entrepreneurs) from 29% to 33%. And since 2010, seven out of 10 provincial governments have also raised their tax rates for the same group. Taken together, Personal Income Tax Rates in Canada are significantly uncompetitive with those in the United States. And Canada also competes with other developed countries for a highly skilled workforce and investment. To measure the competitiveness of Canada`s highest tax rates, the study compares the highest statutory tax rates combined with the rates of 36 developed countries […].