Last Updated: April 3, 2009
As another income tax season approaches, Canadians are busy preparing their individual tax returns and looking for ways to reduce the amounts they will have to pay to the government by way of taxes. This is a good time to consider the role that taxpayers play in keeping the country running and how all this revenue is spent.
Modern day taxes are used to redistribute resources to support a country's infrastructure and social programming. Taxation is also used to address certain economic issues and influence spending decisions. This can be accomplished by raising or lowering taxes on certain activities and offering tax exemptions and credits.
Running a country costs a lot of money. Governments typically finance most of their spending through taxation and the sale of securities, such as bonds. Last year's taxation revenue, which includes revenue from things like personal income tax, corporate income tax, the GST and energy taxes, made up roughly 84% of federal revenues. The remaining 16% came in from other program revenues, EI premiums and Crown corporation revenues.
All in all, the actual federal revenue for 2007-2008 alone was over $242 billion. So, where does all that money go? According to the Canada Revenue Agency, about 25% of that revenue was transferred directly to individuals through programs such as Old Age Security (OAS), Employment Insurance (EI), and the Canada Child Tax Benefit (CCTB). A further 14% was transferred to other levels of government to help cover the cost of things like health care, post-secondary education, public transit, affordable housing and other social services. An additional 12% was transferred to individuals, governments and organizations for identified public policy purposes, such as grants and subsidies for First Nations and Aboriginal peoples, farmers and food producers, infrastructure and regional development, amateur sports, multiculturalism and bilingualism.
A significant amount, approximately 19%, was spent on the operating costs of the government itself. These costs include things like salaries, benefits, facilities, equipment, supplies and travel. An additional 7% went to National Defence spending for Canada’s military forces.
About 12% was spent on public debt charges through interest payments to institutions and individuals who held things like federal bonds or treasury bills. And the final 3% was provided to Crown Corporations such as Canada Mortgage and Housing Corporation (CMHC), the Canadian Broadcasting Corporation (CBC), Atomic Energy Canada and VIA Rail.
As you can see, a great deal of what we as Canadians enjoy is made possible through our tax system, from social programs and public utilities to cultural activities and economic development. While many of us gripe about handing over our hard-earned money to the government, we sometimes forget that taxation enables our government to provide benefits to all Canadians and directly impacts our quality of life. In many respects, our system of taxation reflects Canadians' values and the values of those in power. Governments must make decisions about the amount of money that needs to be raised and how to both raise it and spend it. These decisions directly reflect the type of society that we are striving for as a nation.
While the whole idea of taxation provides an excellent opportunity to think about responsible government, it also provides an opportunity to think about responsible citizenship. As taxpayers and as Canadians, we all have the opportunity to participate fully in our democratic process. Through such participation we not only gain a deeper understanding of the impact budget decisions have on our country, but also the opportunity to directly influence how our tax dollars are spent and the values that such spending reflects.ISBN/ISSN number: 1918-1728