Introducing Canada's tax system
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Introducing Canada's tax system
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Why we pay taxes today
Many of the services and benefits we enjoy today are made possible through taxes. We pay taxes on our income, property, and on most goods and services we purchase in Canada. The government collects these taxes to pay for such things as roads and highways, hospitals, education, health care, national defence, police and fire services, parks and playgrounds, libraries, garbage collection and many other programs and services.
Tax revenue also helps redistribute wealth to benefit lower-income individuals and families by funding social programs such as the old age security pension, Canada child benefit and social assistance.
Pose the question: What does the government do with the money collected today?
Students think about the services provided by the government. They form pairs and create a list of benefits they get from paying taxes (for example, subsidized tuition, public swimming pools, garbage and recycling).
Students share their ideas with the class.
Working in groups of four, students complete worksheet 4, Daily activity chart.
Discuss the answers.
Students participate in a debate: Should income tax be abolished?
Divide the students into three groups:
- Group 1 – argues for the abolishment of income tax
- Group 2 – argues against abolishment
- Group 3 – prepares comments and questions about the issue
Groups prepare their arguments, speeches, comments and questions:
- Groups 1 and 2 – each person speaks for two minutes
- Group 3 – each person comments for one minute on points made by the previous two speakers
Members present two prepared, insightful questions to each speaker in each group.
The goods and services tax/harmonized sales tax (GST/HST)
The goods and services tax (GST) is imposed on most goods and services sold in Canada. The provinces of New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island, combined their provincial sales tax with the GST to form the harmonized sales tax (HST).
Here are some common examples of goods and services on which we do not pay GST/HST:
- basic groceries such as milk, bread, and vegetables
- prescription drugs and drug-dispensing fees
- medical devices such as hearing aids and artificial teeth
- most healthcare, medical, and dental services
- residential rents, including university residences and boarding houses
- used residential housing
- local or municipal bus services and passenger ferry services
- legal aid services
- most banking services
- most child care and educational services, including tuition fees
Set the context
Pose the questions:
- What is the GST?
- What is the HST?
- Which tax is collected in your province, GST or HST?
- How does the GST/HST affect you?
Provide or have students bring in copies of receipts from a variety of transactions. Include receipts for groceries, sundries, shoes and clothing (for adults and children), cleaning products, restaurant meals, car repairs, house maintenance (for example, plumbers), events (for example, movies, concerts).
Prepare envelopes for small groups. Put four receipts of different types in each one.
Each group looks at the receipts and records their observations in a T‑chart, indicating the type of product or service purchased and the type of tax. Rotate the envelopes among the groups, as time permits.
Consolidation of learning
Follow up the exercise by asking students the following questions:
- Is it easy to tell which products and services are taxed?
- Which products and services were not subject to the GST/HST?
- Why should you be aware of what items or services are taxed?
Tax characteristics and categories
Tax characteristics
A tax is defined by its characteristics, such as:
- who pays the tax
- the tax base (the amount we pay tax on)
- the rates applied to the base
- general exemptions and deductions
- other measures, such as how tax is paid
Discuss the characteristics of a tax.
Prompt students to identify the characteristics of the GST/HST based on what they learned. Students should identify the following:
- everyone pays GST/HST when they purchase a good or service
- the purchase price of the item is the tax base
- the GST rate is 5% (HST rate depends on your province)
- basic groceries, prescription drugs, residential rents, and certain other items and services are not subject to the GST/HST
- GST/HST is collected at the point of sale
Tax categories
You pay the same tax rate as everyone, regardless of how much income you earn. Federal corporate income tax in Canada is charged at a flat rate.
You pay a higher rate of tax as you earn more income. Personal income tax in Canada is a progressive tax.
You pay less of your income in tax, as your income gets larger. Sales tax is considered to be regressive because as your income rises, the percentage of your income used to pay sales tax decreases.
Introduce the three different tax categories to students.
Students complete worksheet 5, How tax affects your income.
Discuss how Jack and Emily's after-tax income is affected by the different taxes.
Consolidation of learning
Students work in groups to create a new tax. They must define the characteristics of the tax and determine whether it is proportional, progressive or regressive. Each group presents their tax to the class.
- Date modified:
- 2019-01-31