Federal tax is the income tax collected by the national government. In Canada, the federal government imposes progressive tax rates on individuals and businesses to fund national programs and services such as defense, infrastructure, and social benefits.
How It Works
Federal income tax is calculated based on taxable income, using a series of tax brackets. Each portion of income is taxed at the rate assigned to its bracket. Businesses also pay federal corporate taxes on profits.
Why It Matters
- National funding: Supports federal programs like healthcare transfers, pensions, and infrastructure.
- Progressive structure: Ensures those with higher incomes contribute more.
Final Thoughts
Federal tax is a key part of the Canadian tax system. Understanding how it interacts with provincial tax helps individuals plan their overall tax burden.