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The importance of taxes paid sufficiently and regularly to Govt. in doing its job well and providing good services and benefits

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The importance of taxes paid sufficiently and regularly to Govt. in doing its job well and providing good services and benefits Empty The importance of taxes paid sufficiently and regularly to Govt. in doing its job well and providing good services and benefits

Post by Seva Lamberdar Fri Dec 31, 2021 7:00 pm

I was watching a Punjabi movie recently on Youtube (Ref. 1), which had a storyline about an Indo-Canadian couple visiting their ancestral village in Punjab after living in Canada for over a decade. In one of the scenes in the movie, the visiting woman made a statement showing great appreciation for very good and well-maintained roads in Canada.  

I have encountered similar positive sentiments in the past from a number of Indian visitors to Canada, expressing great appreciation for public libraries in Canadian towns and cities, which generally are stacked with plenty of books, magazines and newspapers in several languages and also carry a large number of computers, CDs and DVDs (movies, documentaries etc.) for public use.    

The question arises naturally as to what makes it possible for Govt. in Canada to easily afford these and other kinds of amenities and services to public on a regular basis, whereas in India the current demands to Govt. by farmers for guaranteed-MSP (minimum support price) for crops are raising doubts (Ref. 2)?  

The answer to the above question clearly seems that, while 60% Canadians pay provincial and federal income tax (Ref. 3), only about 1 per cent of the Indian population is currently paying income tax (Ref. 4).  

In other words, in comparison to people in India, far greater numbers of Canadians (in terms of percentage of total population and including even the waitresses, maids, laborers, fruit pickers and farmers etc.) are reporting their incomes to the tax department each year and paying tax if required (whenever their incomes are higher than the minimum threshold for tax).  

In addition, besides the money collected through taxes from people, businesses and corporations, there are other ways (very small as compared to the tax revenue though) for Govt. in Canada to augment its finances such as by charging fees on Govt. services and rents / royalties on Govt.(public) properties and holdings (including mines and natural resources). Needless to say, the Govt. in Canada has sufficient financial resources in hand to carry out its work and fulfill promises at home and also help people abroad sometimes (during emergencies overseas especially, such as famines, floods, disasters, earthquakes and wars).  

In any case, the three levels of Govt. in Canada (viz. Municipal Govts., Provincial Govts. and Federal Govt.) acquire funds through various municipal (local) taxes and fees (including parking fee, etc.), provincial taxes and fees (including automobile licence fee, etc.), and federal taxes and fees (including environmental tax / fee, etc.), which enables them to discharge their duties satisfactorily.  Moreover, there is generally the transfer of funds to municipal Govts from provincial and federal Govts, especially when the municipal Govts encounter financial deficiencies in spite of collecting municipal taxes.  Likewise, there is generally the transfer of funds to provincial Govts from federal Govt, especially when the provincial Govts encounter financial deficiencies in spite of collecting provincial taxes.

Note, it is the responsibility of provincial and federal Govts. in Canada to run and pay for various Govt. departments (including the department buildings / offices, salaries and pensions to personnel / employees), healthcare (public hospitals, medical equipment, medicines, vaccines, medical staff, etc.), education (public schools and universities, including buildings and staff), water and energy facilities (including dams and electric grid) and R&D projects (including aerospace, biological and nuclear energy etc.), public welfare (including social security, pensions and welfare payments), police and military, roads (building new roads and maintaining properly the local and intercity roads / highways / freeways, etc.) and other infrastructures etc., as well as give foreign aid and pay back the interest and principal amount on debts at home and abroad (involving Govt. bonds / certificates and loans from the World Bank etc.).    

Similarly, the municipal Govts in Canada manage things locally (including paying salaries and pensions for city and municipal employees / personnel), ensure reliable supply of water (drinking and other uses), maintain public parks, playgrounds and recreation centers, clear ice / snow on roads and streets, maintain local roads, streets, street lights, drains and sewers etc. in good condition, maintain emergency services and fire-brigades etc. (including paying for equipment and the salaries and pensions to emergency service personnel), pay for security staff and police department to ensure law and order locally, pay for public transportation (such as local bus service, trains) and libraries, etc.    

Let's next take a quick look, in the following (courtesy Wikipedia), into various taxes collected by Govt(s) from people, businesses and corporations to pay for above services / benefits.  

Firstly, depending on the personal incomes, the rate of federal tax in Canada varies between 15% - 33%, as does the rate of provincial tax (in various provinces) between 5% - 12% . Similarly, the businesses and corporations are required to pay federal tax between 9% - 15% of their income and the provincial tax (in various provinces) between 3% - 12%.    

Secondly, the provincial tax annually on farm land, based on the locality / area, is between 0.4% - 1% of property value for farm residence and one acre surrounding land, whereas the rest of the farm is taxed by provincial Govts at 25% of the residential tax rate (or between 0.1% - 0.25% of property value). Similarly, the tax paid annually to the municipal Govt. on residential property, within certain municipality (city or town), is between 0.4% - 1%  of property value (depending on the locality), whereas the annual commercial / business property tax paid to municipal Govts varies between 1% - 2% of property value.    

Thirdly, there are additional taxes in Canada payable to Govt. (provincial and federal) on individual and business holdings in forestry and natural resources. About one-third of the price at the petrol pump in Canada includes federal, provincial and retail taxes. In addition, there are federal, provincial and retail taxes on heating fuel (propane etc.), tobacco (including cigars and cigarettes), alcohol (beer and wine etc.). There is also the import duty on certain items brought into the country from abroad.    

Lastly, the retail or sales tax (known also as HST or harmonized sales tax), ranging from 13% to 15% of the sale price, includes 5% as GST (payable to the Federal Govt.) and the remaining 8 % to 10% as PST (payable to the provincial Govt.). The HST is charged to all customers in restaurants, shops, large and small stores on nearly everything (including tea, coffee, sweets, pens, pencils, paper, tools, toothbrushes, toothpaste and so on). The seller (large, small and even one-man operation) charging and collecting the HST from customers is required by law (without any remuneration and as part of his / her doing business) to send the collected tax (HST) to Govt. Additionally, sometimes (such as on professional services) there is a 5% tax payable as GST to the Govt.  

In conclusion, the above imparts a quick and brief glimpse into the very broad spectrum of Govt. taxes and expenditures in Canada.  

References

(1)    "Desi Nooh, Valaity Saas" ("Local daughter-in-law, foreign mother-in-law"), https://www.youtube.com/watch?v=koAd8CesxDo    

(2)   "Guaranteed MSP will claim half the Budget," The Hindu BusinessLine, Dec. 17, 2020,  https://www.thehindubusinessline.com/opinion/guaranteed-msp-will-claim-half-the-budget/article33357330    

(3)     "Trudeau is right: 40% of Canadians don’t pay income taxes, which means someone else (60% taxpayers) is picking up the bill," The Financial Post, Feb. 13, 2019, https://financialpost.com/personal-finance/taxes/trudeau-is-right-40-of-canadians-dont-pay-income-taxes-which-means-someone-else-is-picking-up-the-bill    

(4)     "Only 1% of India pays income tax, govt shows proof; tax evasion still a major roadblock," The Indian Express, Sept. 21, 2020,   https://www.financialexpress.com/economy/only-1-of-india-pays-income-tax-govt-shows-proof-tax-evasion-still-a-major-roadblock/2088141/

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by: Dr. Subhash C. Sharma (Dec. 31, 2021)
Seva Lamberdar
Seva Lamberdar

Posts : 6338
Join date : 2012-11-29

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