Chapter 1 - Introduction To Federal Tax In
Canada Exam
Questions With Correct Answers
What doesJthe gov't use tax revenue for? - correct answer-- For initiatives of the gov't
Breakdown of the gov't revenuesJby source - correct answer-Personal Income TaxJ-J50.1%
Corporate Income Tax - 14.4%
GST - 11.4%
Other SourcesJ- 11.4%
EI premiums - 6.7%
Other exciseJtaxes - 1.8%
Non-resident income tax - 2.8%
Custom and importJdutiesJ- 1.4%
why is personal incomeJtax is theJgreatest source of revenue for the gov't? - correctJanswer--
If a corporation has too high of a rate of tax it won't do business in the country. A low tax rateJacts as an incen
tiveJfor the business
- THINK: Corporations higher individuals. Individuals pay tax on earningsJ-
>Jtherefore the tax responsibility isJtransferred.
Was does "individual" mean in Income taxJand GST - correct answer-Human being
WhatJis a "Person" (taxable entities) in Income Tax - correct answer-Individual, Corporation, Trust
WhatJis a "Person" (taxable entities) in GST/HST -Jcorrect answer-
Individual, Corporation, Trust, Partnership, Estates, Charities, Societies, Unions, Clubs, Associations, Commi
ssions, etc.
- Some of the entities that are responsible for GST/HST are not responsible for income tax.
-
For example: Partnerships don't pay income tax as a partnership, rather the individual partners pay tax as in
dividuals
, Legal Forms of a Business - correct answer-
sole proprietorship, partnership, corporation, trust (trust has 3 parties, trustee, trustor, beneficiary)
Taxation and economic policies allow for: -Jcorrect answer--
*Resource allocation*: this includes national defense, education, health care
- *Distribution effects*: higher tax for higher income; lower tax for lower income
- *Stabilization effects*: public spending to stimulate the economy
-> THINK: Giving people money in timesJof trouble so the economy doesn'tJcollapse
- *Fiscal Federalism*: transfer to provincial and municipal governments
Qualitative CharacteristicsJ-Jcorrect answer-There is often a trade-
off between equity, neutrality, adequacy, flexibility, simplicity & ease of compliance, certainty, balance betw
een sectors, international competitiveness
Basic Structure of the Income Tax Act - correct answer-
There are 19 Parts broken down into DivisionsJand Subdivisions. There 281 Sections in the Income Tax Act.
Other Income tax legislation includes - correct answer-Draft legislation
Income Tax regulations
TaxJTreaties
Draft legislation - correct answer-
Proposed in the annual federal budget, but must then be passed by Parliament, which can take considerable
time. Can be a particular challenge in an election year
Income tax regulations - correct answer-
gives details for the administration and enforcement of the Income Tax Act as well as prescribed rates. Defin
es requirements for various classesJof persons.
TaxJTreaties - correct answer--
Agreements with other countries thatJmay override theJIncome TaxJAct in an attemptJtoJavoid double taxati
on and tax evasion by personsJthat may be considered resident for more than one jurisdiction.
Canada Exam
Questions With Correct Answers
What doesJthe gov't use tax revenue for? - correct answer-- For initiatives of the gov't
Breakdown of the gov't revenuesJby source - correct answer-Personal Income TaxJ-J50.1%
Corporate Income Tax - 14.4%
GST - 11.4%
Other SourcesJ- 11.4%
EI premiums - 6.7%
Other exciseJtaxes - 1.8%
Non-resident income tax - 2.8%
Custom and importJdutiesJ- 1.4%
why is personal incomeJtax is theJgreatest source of revenue for the gov't? - correctJanswer--
If a corporation has too high of a rate of tax it won't do business in the country. A low tax rateJacts as an incen
tiveJfor the business
- THINK: Corporations higher individuals. Individuals pay tax on earningsJ-
>Jtherefore the tax responsibility isJtransferred.
Was does "individual" mean in Income taxJand GST - correct answer-Human being
WhatJis a "Person" (taxable entities) in Income Tax - correct answer-Individual, Corporation, Trust
WhatJis a "Person" (taxable entities) in GST/HST -Jcorrect answer-
Individual, Corporation, Trust, Partnership, Estates, Charities, Societies, Unions, Clubs, Associations, Commi
ssions, etc.
- Some of the entities that are responsible for GST/HST are not responsible for income tax.
-
For example: Partnerships don't pay income tax as a partnership, rather the individual partners pay tax as in
dividuals
, Legal Forms of a Business - correct answer-
sole proprietorship, partnership, corporation, trust (trust has 3 parties, trustee, trustor, beneficiary)
Taxation and economic policies allow for: -Jcorrect answer--
*Resource allocation*: this includes national defense, education, health care
- *Distribution effects*: higher tax for higher income; lower tax for lower income
- *Stabilization effects*: public spending to stimulate the economy
-> THINK: Giving people money in timesJof trouble so the economy doesn'tJcollapse
- *Fiscal Federalism*: transfer to provincial and municipal governments
Qualitative CharacteristicsJ-Jcorrect answer-There is often a trade-
off between equity, neutrality, adequacy, flexibility, simplicity & ease of compliance, certainty, balance betw
een sectors, international competitiveness
Basic Structure of the Income Tax Act - correct answer-
There are 19 Parts broken down into DivisionsJand Subdivisions. There 281 Sections in the Income Tax Act.
Other Income tax legislation includes - correct answer-Draft legislation
Income Tax regulations
TaxJTreaties
Draft legislation - correct answer-
Proposed in the annual federal budget, but must then be passed by Parliament, which can take considerable
time. Can be a particular challenge in an election year
Income tax regulations - correct answer-
gives details for the administration and enforcement of the Income Tax Act as well as prescribed rates. Defin
es requirements for various classesJof persons.
TaxJTreaties - correct answer--
Agreements with other countries thatJmay override theJIncome TaxJAct in an attemptJtoJavoid double taxati
on and tax evasion by personsJthat may be considered resident for more than one jurisdiction.
