TEST BANK
** All Chapters included
,Table of Contents are given below
Volume I
1. Introduction to Federal Taxation in Canada
2. Procedures and Administration
3. Income or Loss from an Office or Employment
4. Taxable Income and Tax Payable for Individuals
5. Capital Cost Allowance
6. Income or Loss from a Business
7. Income from Property
8. Capital Gains and Capital Losses
9. Other Income, Other Deductions, and Other Issues
10. Retirement Savings and Other Special Income Arrangements
,Chapter 1 Introduction to Federal Taxation in Canada
1.1 Quick Review
1) There are no items in this section.
Type: ES
1.2 Self-Study Problems
1) There are no items in this section.
Type: ES
1.3 Practical Case
1) There are no items in this section.
Type: ES
1.4 Online Exercises
1) The major source of federal revenues is the personal income tax. Indicate three other types of taxes that
contribute to federal revenues.
Answer: The other sources of federal revenues that are shown in Figure 1-1 of the textbook are:
• Corporate income tax.
• Non-resident income tax.
• GST.
• Customs and import duties.
• Other excise taxes.
• Employment Insurance premiums.
Type: ES
Topic: Federal revenue sources
2) What is the meaning of "person" when the term is used in the ITA?
Answer: In the ITA, the term "person" refers to an individual, a corporation, a trust, or an estate.
Type: ES
Topic: Definition - "Person" ITA 248(1)
3) Briefly describe the procedures used in calculating provincial or territorial income tax for individuals
other than for individuals residing in Quebec.
Answer: Provincial or territorial income tax for individuals is calculated by applying provincial or
territorial income tax rates to taxable income for federal income tax purposes. Provincial or territorial
personal income tax credits are then applied to the resulting gross provincial or territorial income tax. The
provincial and territorial income tax brackets may differ from the federal income tax brackets. In
addition, provincial and territorial personal tax credits are often different than the federal personal tax
credits.
Type: ES
Topic: Income tax payable - federal income tax
4) The Canadian income tax system is often used to achieve various economic objectives. Give three
1
, examples that illustrate this point.
Answer: There are many examples. The textbook divides them into resource allocation (e.g., public
health care), distribution effects (e.g., federal GST credit), stabilization effects (e.g., deficit reduction), and
fiscal federalism (e.g., allocations to various levels of government).
Type: ES
Topic: Canadian income tax system - objectives
5) Provide an example of how tax policy can be used to influence resource allocation.
Answer: Examples provided in the textbook are as follows:
• Tax revenues are used to provide public goods and services.
• Excise taxes are used to discourage the consumption of alcohol and tobacco products. There are many
other examples that could be cited.
Type: ES
Topic: Canadian income tax system - objectives
6) The government pays a Canada Child Benefit to the parents of children who are under 18 years of age.
The payments are reduced where the income of the parents or supporting persons are above a certain
threshold amount. What objectives are achieved by this benefit?
Answer: The Canada Child Benefit is designed to assist low income families with the costs of
supporting and raising children. The government is also encouraging population growth.
Type: ES
Topic: Canadian income tax system - objectives
7) Indicate three disadvantages of a tax system that uses progressive rates.
Answer: Possibilities include those progressive rates that:
• Increase the complexity of the system.
• Are unfair to individuals with highly variable levels of annual income.
• Are unfair to families with a single income earner.
• Lead to pressure for various types of income tax concessions.
• Discourage high income individuals from making additional efforts.
• Encourage income tax evasion.
Type: ES
Topic: Canadian income tax system - objectives
8) A regressive tax is one that taxes high income individuals at lower effective rates. Explain why a sales
tax levied at a flat rate of 8% can be regressive.
Answer: While the sales tax rate is the same for all individuals without regard to their income level,
lower income individuals spend a higher percentage of their total income than high income taxpayers.
Since the sales tax is charged on the amounts spent, this means that the sales tax paid by lower income
individuals represents a larger percentage of their total income. As a consequence, they are generally
considered to be regressive in nature.
Type: ES
Topic: Canadian income tax system - regressive vs. progressive rates
2
** All Chapters included
,Table of Contents are given below
Volume I
1. Introduction to Federal Taxation in Canada
2. Procedures and Administration
3. Income or Loss from an Office or Employment
4. Taxable Income and Tax Payable for Individuals
5. Capital Cost Allowance
6. Income or Loss from a Business
7. Income from Property
8. Capital Gains and Capital Losses
9. Other Income, Other Deductions, and Other Issues
10. Retirement Savings and Other Special Income Arrangements
,Chapter 1 Introduction to Federal Taxation in Canada
1.1 Quick Review
1) There are no items in this section.
Type: ES
1.2 Self-Study Problems
1) There are no items in this section.
Type: ES
1.3 Practical Case
1) There are no items in this section.
Type: ES
1.4 Online Exercises
1) The major source of federal revenues is the personal income tax. Indicate three other types of taxes that
contribute to federal revenues.
Answer: The other sources of federal revenues that are shown in Figure 1-1 of the textbook are:
• Corporate income tax.
• Non-resident income tax.
• GST.
• Customs and import duties.
• Other excise taxes.
• Employment Insurance premiums.
Type: ES
Topic: Federal revenue sources
2) What is the meaning of "person" when the term is used in the ITA?
Answer: In the ITA, the term "person" refers to an individual, a corporation, a trust, or an estate.
Type: ES
Topic: Definition - "Person" ITA 248(1)
3) Briefly describe the procedures used in calculating provincial or territorial income tax for individuals
other than for individuals residing in Quebec.
Answer: Provincial or territorial income tax for individuals is calculated by applying provincial or
territorial income tax rates to taxable income for federal income tax purposes. Provincial or territorial
personal income tax credits are then applied to the resulting gross provincial or territorial income tax. The
provincial and territorial income tax brackets may differ from the federal income tax brackets. In
addition, provincial and territorial personal tax credits are often different than the federal personal tax
credits.
Type: ES
Topic: Income tax payable - federal income tax
4) The Canadian income tax system is often used to achieve various economic objectives. Give three
1
, examples that illustrate this point.
Answer: There are many examples. The textbook divides them into resource allocation (e.g., public
health care), distribution effects (e.g., federal GST credit), stabilization effects (e.g., deficit reduction), and
fiscal federalism (e.g., allocations to various levels of government).
Type: ES
Topic: Canadian income tax system - objectives
5) Provide an example of how tax policy can be used to influence resource allocation.
Answer: Examples provided in the textbook are as follows:
• Tax revenues are used to provide public goods and services.
• Excise taxes are used to discourage the consumption of alcohol and tobacco products. There are many
other examples that could be cited.
Type: ES
Topic: Canadian income tax system - objectives
6) The government pays a Canada Child Benefit to the parents of children who are under 18 years of age.
The payments are reduced where the income of the parents or supporting persons are above a certain
threshold amount. What objectives are achieved by this benefit?
Answer: The Canada Child Benefit is designed to assist low income families with the costs of
supporting and raising children. The government is also encouraging population growth.
Type: ES
Topic: Canadian income tax system - objectives
7) Indicate three disadvantages of a tax system that uses progressive rates.
Answer: Possibilities include those progressive rates that:
• Increase the complexity of the system.
• Are unfair to individuals with highly variable levels of annual income.
• Are unfair to families with a single income earner.
• Lead to pressure for various types of income tax concessions.
• Discourage high income individuals from making additional efforts.
• Encourage income tax evasion.
Type: ES
Topic: Canadian income tax system - objectives
8) A regressive tax is one that taxes high income individuals at lower effective rates. Explain why a sales
tax levied at a flat rate of 8% can be regressive.
Answer: While the sales tax rate is the same for all individuals without regard to their income level,
lower income individuals spend a higher percentage of their total income than high income taxpayers.
Since the sales tax is charged on the amounts spent, this means that the sales tax paid by lower income
individuals represents a larger percentage of their total income. As a consequence, they are generally
considered to be regressive in nature.
Type: ES
Topic: Canadian income tax system - regressive vs. progressive rates
2
