Intro to Taxes – Part 2

Find the Taxes• In groups, look in the envelope that

Mr. Zapfe has given you. Your job is to “find the taxes” in each receipt.• Fill out the chart with the type of

product or service, the amount of taxes paid and any notes or comment you have.• After you have examined all the

receipts, fill out the “What did you learn about taxes from these receipts” section of the chart.

Is everything taxed!?• http://

www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/gnrl/txbl/xmptgds-eng.html

Types of Taxes• Direct Taxes – taxes that are levied

against the individual taxpayer who is responsible for paying them.• Examples: Income Taxes, Property Taxes

• Indirect Taxes – Taxes that are levied against the taxpayer but collected by a third party.• Examples: Fuel Taxes, Sales Taxes

Types of Taxes - Continued

• Proportional Taxes (Flat Taxes): taxes that are applied at a constant rate against a taxpayer’s income regardless of the type of income or level of income.•Example: Sales Tax (In Ontario, we are charged 13% on all goods and services, regardless of our income level)

• Progressive Taxes: Taxes that increase as the level of income increases• Example: Personal Income Taxes

• Regressive Taxes: You pay a decreasing percentage of your income in tax as your income increases. •A sales tax is considered to be a regressive tax since high income earners pay a smaller part of their income in tax than middle income earners, when they buy a product.

Types of Taxes - Continued

Other Tax Vocabulary• User Taxes: a tax paid to use a facility or service• Example: Toll charged for using a bridge or road

• Transfer Taxes: a tax on the value of property when it changes ownership.• Example: Land Transfer Tax (In Toronto, we have 2)

Land Transfer Tax Rates - Ontario

• 0.5% of the value up to and including $55,000,

• 1% of the value of the consideration which exceeds $55,000 up to and including $250,000.

• 1.5% of the value of the consideration which exceeds $250,000

• 2% of the amount by which the value of the consideration exceeds $400,000 for land that contains at least one and not more than two single family residences.

An Example:

John and Julie are buying a home for $550,000, how much land transfer tax will they pay?

Total Tax Payable is: $7475!

Category Calculation Tax Payable

Up to $55,000 55,000*0.005 275

$55,000-$250,000

195,000*0.01 1950

$250,000-$400,000

150,000*0.015 2250

$400,000+ 150,000*0.02 3000

In Toronto

In Toronto, we have a municipal land transfer tax as well. The rates are as follows:Up to and including $55,000.00 X 0.5% of total property valueFrom $55,000.01 to $400,000.00 X 1% of total property valueOver $400,000.00 X 2% of total property value

This means if John and Julie buy in Toronto, they would pay an additional $6775 in land transfer taxes!

HST vs. GST• GST – Goods and Services Tax (5%)

Exists in all jurisdictions in Canada, but is often “hidden” in the HST.• PST – Provincial Sales Tax (amount

varies by province) • HST – Harmonized Sales Tax exists in

Nova Scotia, New Brunswick, Newfoundland, Ontario.

The GST/HST Credit

• This tax credit is designed to help low to moderate income individuals and families offset all or part of the GST/HST that they pay. • It is paid in 4 equal installments.

Qualifying for the GST/HST Credit

To Qualify, you must meet ONE of the following criteria:

1. Be 19 years old2. You have, or previously had a

spouse or common law partner3. You are (or previously were) a

parent and live (or previously lived) with your child.