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Taxes: Provincial Taxation in Canada

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We’ve already looked at taxes in Canada at the federal level – let’s take a look at the provincial level. Although many processes and rates are uniform, there is still some variation among the provinces and territories in Canada.

The CRA (Canadian Revenue Agency) collects taxes for the federal government, and also is the agent who collects taxes on behalf of the provinces, so that taxpayers can file a single tax return when it comes to personal income tax. The CRA then passes tax revenue down to the provincial governments. The provinces that have entered into this agreement with the federal government are called “agreeing provinces”1.

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The exception to this system is Quebec. In Quebec, taxes are collected by the Agence du Revenu du Québec or “Revenu Québec”, both for the province and for the federal government. There is more information here about their role. Like the CRA, they not only collect and redistribute taxes, but also administer certain social programs. Income tax rates are different in Quebec – you can take a look at the brackets here.

Each of the agreeing provinces must follow the same guidelines for what income is considered taxable. But they have their own rates of taxation for person income, as seen in the graph.  You can view them in more detail here on the government websites. Provincial and territorial personal income tax rates are significantly lower than the federal personal income tax rates. There is range both in the percentages and in the income brackets, with Nunavut taxing only only 4% on those who make $43,780 or less, to Nova Scotia taxing 8.79% on those who make $29,590 or less. For the higher brackets, the Yukon takes only 15% on those making over 500,000, where as Prince Edward Island taxes 16.7% on any income over $63,969.4

The CRA is also responsible for collecting corporate taxes, some of which are passed back down to the provincial governments. Alberta and Quebec collect their own corporate taxes.

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All provinces have payroll taxes for Worker’s Compensation premiums (insurance for those are injured on the job). There are also payroll taxes for the Employer Health tax in Ontario. Quebec collects a number of payroll taxes, many of which fall under federal jurisdiction for the other provinces. (There is a breakdown here of those taxes.)

Sales tax is where we see the most variation between provinces and territories. The federal government collects the Goods and Services Tax or GST – a 5% value-added tax on goods and services. All provinces except for Alberta, and the territories of Nunavut, Yukon, and Northwest, levy their own sales tax or retail sales tax. In the following provinces – New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island – the provincial sales tax (PST) and the GST are combined into the HST or Harmonized Sales Tax, which is 15%.3 You can see the breakdown of sales tax by province in the table2.

Provincial governments (in addition to the federal government) also have excise taxes on inelastic goods such as gasoline and “sin tax” on items like cigarettes and alcohol. This page has a breakdown of gasoline taxes across Canada.

Although there is some variation among provinces, the essentials are mostly the same. Like the federal government, the provincial and territorial governments rely primarily on personal income tax for revenue.

1.https://en.wikipedia.org/wiki/Income_taxes_in_Canada#Provincial_and_territorial_personal_income_taxes

2. http://www.calculconversion.com/sales-tax-calculator-hst-gst.html

3. https://en.wikipedia.org/wiki/Sales_taxes_in_Canada

4. https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html#federal

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