Canadian economy/tax/political system

[thulin]

Could someone please answer some questions about Canada?

1) From what I read, income tax in Canada vary from 30 to 45%, correct? Is this federal or territorial tax? It seems progressive, how do I calculate it?

2) I read that employers pay tax on salary aswell, 2-6%?. What is it called? How do I calculate it? Federal?

3) As far as I understand everyone who works and pay taxes in Canada earn "CPP" that will give you about 25% of your salary after 65, right? It seems like your employer also pay some sort of pension plan, is this compulsory? How is this usually arranged?

4) Is taxation of business territorial, it seems to vary..?

5) I have been looking at real estate ads in BC and find that real estate taxes are pretty high. How do I calculate it? Does it vary from territory to territory?

6) Is it expensive to insure real estate and vehivles in Canda? Got any example you want to share?

7) How does the education system work in Canada?

Well, let´s see what I get of this and then maybe ask some more questions... Thank you!

 

[thulin]

Anyone..?

 

[nomore]

Tax rates are hard to calculate in Canada, mainly due to the varying places we pay taxes, ie Goods and services, federal, provincial, municipal....etc.

but here are some basic numbers to get you started...
Federal tax rates for 2006 are:
15% on the first $36,378 of taxable income;
22% on the next $36,378 of taxable income;
26% on the next $45,529 of taxable income; and
29% of taxable income over $118,285.

Procincial Tax for British Columbia (it differs per province)
6.05% on the first $33,755 of taxable income, +
9.15% on the next $33,756, +
11.7% on the next $10,000, +
13.7% on the next $16,610, +
14.7% on the amount over $94,121

Then you have to add on to that, municipal property taxes, which vary greatly. Goods and services taxes, capital gains taxes etc.

As for insurance, that also varys greatly. Home tax is based on insurable items, and replacement cost etc.

Car insurance is based on driving records, age, and what provider you go with. As an example, I pay $140/month for my car insurance, and that is with full coverage.

As for pension, No employer is forced to offer a pension plan, some do, but many don't, and many are trying to move away from it, mainly do to the extreem costs associated with them.

CPP (Canada pension plan) is a pension system whereby tax payers pay into it throughout their working career (kind of like a tax), then after 65 they are eligable to receive money from the plan. However the amount is usually very small, and more often than not, is not enough to live off of, so it must be supplimented.

 

[thulin]

Thanks a alot nomore!

Darn you guys pay low taxes compared to Sweden..! Over here you pay 29-35% municipal tax on everything over 2000 $ annually.

On top of that you pay an extra 20% "federal" tax on everything over 48 000 $ (49-55% over 48 000 $).

But thats not it, you also have to pay an extra 5% (federal) on everything over 67 000 $.

So, if you make 100 000 $ a year you will have to pay 42 000 $ in taxes. Not that bad? Well, then you will have to calculate that your imployer has to pay 32,8% of your salary in different taxes ("employers fee" and "social fee").

So, if I want to pay you 132 800 $ in one year, you would keep at most 58 000 $ (57% tax).

Capital gain = 30% flat rate (interest, stocks), but after 28% business tax that means about 50% total tax...

"Goods and services taxes", is that what is called "value added tax"? Around here it is 25%.

Your car incuranse seems EXPENSIVE though, I nevered payed more than 67 $ a month for my cars, but those where cars for just over 20 000 $.

So, regarding pension, every other canadian save in a so called "RRSP"? What is the deal with that? Why save in one of those instead of just buying stocks as usual, or paying off mortgages?

Thank you for clearing things out for me!

 

[Jay]

You don't pay tax on the RRSP money.

 

[Jay]

Thanks a alot nomore!

Darn you guys pay low taxes compared to Sweden..! Over here you pay 29-35% municipal tax on everything over 2000 $ annually.

On top of that you pay an extra 20% "federal" tax on everything over 48 000 $ (49-55% over 48 000 $).

But thats not it, you also have to pay an extra 5% (federal) on everything over 67 000 $.

So, if you make 100 000 $ a year you will have to pay 42 000 $ in taxes. Not that bad? Well, then you will have to calculate that your imployer has to pay 32,8% of your salary in different taxes ("employers fee" and "social fee").

So, if I want to pay you 132 800 $ in one year, you would keep at most 58 000 $ (57% tax).

Capital gain = 30% flat rate (interest, stocks), but after 28% business tax that means about 50% total tax...

"Goods and services taxes", is that what is called "value added tax"? Around here it is 25%.

Your car incuranse seems EXPENSIVE though, I nevered payed more than 67 $ a month for my cares, but those where cars for just over 20 000 $.

So, regarding pension, every other canadian save in a so called "RRSP"? What is the deal with that? Why save in one of those instead of just buying stocks as usual?

Thank you for clearing things out for me!

Sounds like you guys either got invaded by Russia, or should be invaded by America!!

 

[thulin]

Over here you pay 29-35% municipal tax on everything over 2000 $ annually

Not quite true, 18-24% municipal tax and 9-12% in "territorial tax", the later is somewhat a public health incuranse.

 

[thulin]

Sounds like you guys either got invaded by Russia, or should be invaded by America!!

No, but you guys could take over any day as far as I am concerned... :lol:

 

[thulin]

Re: RE: Canadian economy/tax/political system

You don't pay tax on the RRSP money.

How does this work? Are there any perks saving in one of those?

 

[nomore]

Re: RE: Canadian economy/tax/political system

You don't pay tax on the RRSP money.

How does this work? Are there any perks saving in one of those?

There is a limit as to how much each year you can claim as "tax free" when you put money into one of these accounts. Basically you get your tax money back from any money that was invested into an RRSP.

However, there is a catch. As soon as you take the money out of the account, you get taxed on it. But the idea is that when you retire, you only take out small chunks of cash at a time, in which case you get taxed in a lower bracket, therefore reducing the total amount taxed from your retirement savings.

 

[thulin]

Re: RE: Canadian economy/tax/political system

There is a limit as to how much each year you can claim as "tax free" when you put money into one of these accounts. Basically you get your tax money back from any money that was invested into an RRSP.

However, there is a catch. As soon as you take the money out of the account, you get taxed on it. But the idea is that when you retire, you only take out small chunks of cash at a time, in which case you get taxed in a lower bracket, therefore reducing the total amount taxed from your retirement savings.

"Lower bracket"? I just calculated that if you make 3 000 $ a month you pay around 21% tax in BC, and if you earn 7500 $ you pay around 29% (right?).

So you have a 8% tax gain on RRSP if you make 7500 $ now and 3 000 $ when retired?

We have the exact same thing in Sweden, maximum 3 000 $ a year. The thing is that our marginal tax over a salary of 4 000 $ a month is 50% or more, so as far as you have a pension around 4 000 $ a month, you make a 20% tax benefit saving everything over 4 000 $ (max 3 000 $ a year). This is very strange in a country like Sweden, giving perks to people making more money than others, it use to be the absolute opposite!

 

[nomore]

With us, the general limit is $16500 per year, but that can vary, depending on other deductions.

So let's say you are making $36,000 per year during your working career, at 21% (if you don't include the other taxes) you are paying $7560/year in taxes.

But when you retire, you only take out money from the RRSP account that you need. So let's say, all you need to live on when you retire is 24000/year, in this case you are only paying taxes on that amount which in theory is only $5040/year

So that is a 2520 savings in taxes per year, that you would have otherwise paid out had you been paying on the full salary you were making when you were working.

This is a very basic example...the actual amounts would vary of course.

 

[thulin]

With us, the general limit is $16500 per year, but that can vary, depending on other deductions.

So let's say you are making $36,000 per year during your working career, at 21% (if you don't include the other taxes) you are paying $7560/year in taxes.

But when you retire, you only take out money from the RRSP account that you need. So let's say, all you need to live on when you retire is 24000/year, in this case you are only paying taxes on that amount which in theory is only $5040/year

So that is a 2520 savings in taxes per year, that you would have otherwise paid out had you been paying on the full salary you were making when you were working.

This is a very basic example...the actual amounts would vary of course.

But... You don´t have to pay 21% tax when saving it - but you have to pay 21% when taking it out..? Whats the point?