Expert: Peter Francis - 3/26/2002

Question
Hi
i'm a thai student from Thailand curently study in vancouver. I'd like to know about tax system in BC.

how does goverment charge the tax?  and what rate?  what's GST?
what items do they charge?

thank you very much

Answer
Ask any Canadian and most will complain that they are taxed every time there is a financial transaction.

The first place most people are taxed is on their income. Although we fill out our income tax forms once a year, tax is deducted from each paycheque that we receive. The tax and the annual tax form is submitted to the federal government in Ottawa, although the income tax is really based on two rates: the federal income tax rate and the provincial income tax rate. The federal rate is based on taxable income and rises as income rises. I think the federal rate is 17% of the first $29,500 in earnings, and then the rate rises for the next step and the highest rate is for earnings over $50,000. I am not sure of the rates or where the steps are as they have changed recently. The provincial income tax is pegged to the federal tax and I think the current rate is 45% of the federal rate. The federal government collects the tax and submits the provincial portion directly to the provincial government.

The next place that people are taxed is when they spend money. The provincial government charges a tax on most goods sold in the province, but not on services. This tax is currently 7.5% and is collected by the merchant at the time of sale. So if you buy a car for $10,000 you will pay an additional $750 in provincial sales tax (PST.) However if you pay someone to fix your car you will pay no sales tax on the service.

A second tax is placed by the federal government on financial transactions. This is the Goods and Services Tax (GST) which is 7% of all goods and services with a few exemptions. (I can't think of what goods or services are GST exempt). This tax is also collected by the merchant at the time of the transaction.

Additional taxes are charged in the form of service fees for things like business licenses, dog licenses, property tax and more by the municipal government. User fees for parks and other government owned things. (Lots of these things used to be free.)

I hope this is helpful to you.

Thanks for your question.

Peter