The Tax Collection Of Ontario Essay

1499 Words Nov 30th, 2016 6 Pages
In December 1997, the Canadian Federal Government introduced the Tax Collection Agreement (TCA). This new guideline changed Ontario’s provincial tax from a tax-to-tax (TOT) system to a tax-to-income (TOI) system which differed the method of calculating provincial and federal tax liabilities.
Under tax-to-income (TOI) system, Ontario’s provincial tax has different tax brackets for personal income than the Canadian federal tax. Both tax systems have five tax brackets, but for the Ontario’s tax, the first bracket includes the first $41,536 of taxable income while the federal’s includes the first $45,282. The other tax brackets for Ontario’s provincial tax are the next $41,539, the next $66,925 and the next $70,000 respectively with the top tax bracket as the amount over $220,000 of taxable income. For the federal tax system, the second to forth tax brackets are the next $45,281, the next $49,825 and the next $59,612 subsequently and the top bracket is amount excesses $200,000. Simply based on these classification of tax brackets, the federal system is relatively more progressive than the Ontario’s system since with the same amount of taxable income, the federal standard of entering a new tax bracket for richer people is lower. However, in addition to the difference of tax brackets, the provincial and federal systems use different tax rates of each bracket too. According to Canada Revenue Agency, the Ontario provincial tax rates range from 5.05% to 13.16% in 2016 and federal’s…

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