Doomsayers in Canada who said that the de-coupling of provincial income tax calculations from the federal tax bill would allow the provinces to resist federal tax cuts say they have been proved right, although the extra complications of the new system make it hard to compare like with like.
The provinces used to apply a 'tax on tax' system, whereby they could adjust the rate of tax but not much else. Now, they use a 'tax on income' system, and there are at least three variables: tax bands, tax rates and the minimum deductible, which they seem to be using to increase their tax take rather than reduce it.
Consider for instance the federal tax reductions in the October, 2000, mini-budget. All provinces adopted the cut in the capital gains inclusion rate to 50%, but the federal government also announced revised tax brackets which had the effect of dropping the tax rate on lower income Canadians and significantly raising the rate at which the top level of federal tax cut in.
Up to and including the year 2000, the brackets themselves were much the same federally and in the provinces, subject to minor differences. Not any more! Other than Quebec, Alberta and British Columbia, the provinces have retained three brackets and in every case, the top rate cuts in at around the $60,000 mark, give or take a thousand dollars or so. These top brackets, of course, are effectively based upon where the federal top bracket was in the year 2000, and steadfastly ignore the major change for 2001 announced by the feds last October.
As expected, therefore, most of the provinces have quite deliberately chosen to use their new-found "flexibility" to avoid passing on to their residents the equivalent benefit that flows from the federal changes. Under the old "tax on tax" system, they would not have been able to do this.
FEDERAL BRACKETS for 2001 (indexed for 2002):
16% tax on taxable income up to $30,754;
22% tax on taxable income from $30,755-$61,509
26% tax on taxable income from $61,510-$100,000
29% over that.
.
Network Tweets
Network BlogsContent
provided by
|
Archive | Resources | Partners | Site Map | Links | Newsletter Archive | Contact | RSS Feeds | About | Syndication | Advertising & Marketing | Recruitment | Terms & Conditions | Privacy & Cookies
Copyright © 2012 - All Rights Reserved - Tax-News.com
IMPORTANT NOTICE: Tax-News.com has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.
Write a comment