The Canadian taxation system is a complex framework governed by federal, provincial, and territorial regulations. At the federal level, the Canada Revenue Agency (CRA) administers and enforces tax laws, while each province and territory has its own taxation authority responsible for collecting taxes and administering certain tax credits and benefits.
Both individuals and businesses are required to pay income tax on their earnings. Personal income tax rates vary depending on income levels. The Canadian Personal Income tax framework is a progressive taxation system where the tax rate increases as the taxable income increases. In other words, individuals or entities with higher incomes are taxed at a higher rate, while those with lower incomes are taxes at a lower rate, or may even be exempt from certain taxes altogether.
The goal of a progressive tax system is to distribute the tax burden more equitably, with higher-income individuals contributing a larger share of their income to taxes compared to lower-income individuals. In a progressive tax system, tax rates are typically structured into income brackets or tiers, with each bracket subject to a different tax rate. As an individual’s income increases and moves into higher brackets, the portion of income within each bracket is taxed at progressively higher rates.
Businesses are subject to corporate income tax on their profits.