Do You Know The Size Of Your Tax Footprint?

I teach courses to business owners about taxes and I am amazed sometimes by how little Canadians understand about our tax system. Canada has a self-assessment system which requires a number of returns to be filed. Other countries do not require income tax returns so you might think that there would be enough complaining about Canada’s system that people understand it!

So here is the 20 second version of the tax burden in Canada. You pay income tax when you earn money either through salary, interest or dividends. You pay sales tax when you spend money – this is called HST or GST. You also pay “sin” taxes in addition to sales tax, when you purchase items such as alcohol or tobacco.

If you are a business owner who hires employees you will pay payroll taxes, known as Employment Insurance (EI) and Canada Pension Plan (CPP).

The only way to avoid paying tax on making money is to have your investments in a Tax Free Savings Account (TFSA). Everything else is taxable either now, or in the case of RRSP’s later.

People ask me – is this income taxable? The answer is always yes.

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Painless Financial Training Group Inc. with Debi Peverill

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