A 'TAXING' TOPIC

DOLLAR$ and $EN$E, July 2009, by Brian Bogaert

A 'TAXING' TOPIC
Understanding the Basics About Tax

How many of you have heard your parents or other adults complain about taxes? Pretty much all of you I’m guessing!

I decided to write about TAXES because income tax season just recently ended and since all kinds of taxes are very much related to your money I thought it might be time to discuss it with you.

Does Tax Effect Teens?
It may seem as if taxes don’t really have too much of an obvious effect on you like they do to adults, but guess what? …they do!! If you buy anything in this country then you pay taxes. You’ve all heard about GST and PST (or HST for those of you in some of the eastern provinces). One, or a combination of two, of those taxes are what you will pay on almost everything you buy depending on what province or territory you live in.

Here’s a quick tax chart to show you how much you pay in taxes depending on where you live in Canada:

Province/Territory	Tax Amount	Cost/$1
British Columbia	PST: 7% & GST: 5%	12 cents
Alberta	PST: 0% & GST: 5%	5 cents
Saskatchewan	PST: 5% & GST: 5%	10 cents
Manitoba	PST: 7% & GST: 5%	12 cents
Ontario 8%	PST: 8% & GST: 5%	13 cents
Quebec* Here you have to pay PST on your GST	PST: 7.5% & GST: 5%	12.9* cents
Nova Scotia	HST: 13%	13 cents
New Brunswick	HST: 13%	13 cents
PEI* Here you have to pay PST on your GST	PST: 10% & GST: 5%	15.5* cents
Newfoundland	HST: 13%	13 cents
Yukon Territory	PST: 0% & GST: 5%	5 cents
Northwest Territories	PST: 0% & GST: 5%	5 cents
Nunavut	PST: 0% & GST: 5%	5 cents
As of July 2009

GST (goods and services tax), PST (provincial or retail sales tax), HST (harmonized sales tax which is a combination of GST and PST in one)

So what is tax anyway and why do we have to pay it?
Well get this – in 1917, when the world was in the middle of the First World War (WWI), many governments had already implemented a temporary payment, by the citizens of those countries, to help pay for the war effort. In that year, Canada decided to follow suit and did the same by charging a tax to all working Canadians. But here’s the interesting part, it was supposed to be TEMPORARY!!! Here it is almost one hundred years later and we STILL have income tax, PLUS several other taxes, including the tax on sales we already discussed, and property tax, liquor tax, fuel tax, airport tax, and sometimes hotel tax or hidden taxes like excise tax, gas tax and import duties. Too much to get into right now, this is just the basics!

Taxes are basically mandatory fees that the government charges its citizens to help pay for the services it provides. It is the government that repairs our roads, runs our schools and hospitals (at least here in Canada, where we are very lucky!), helps to look after our children and elderly and much more. It costs a lot of money to do all of these things so the government requires us to pay some of the money that we earn back into the country. Whether you believe it’s good or bad, fair or unfair, it’s the way we do things here and we have no choice.

Here's an Example
Let’s say you want to buy an iPod that costs $100 and is subject to tax. In Alberta for instance, it would cost you $105 once the 5% GST was added ($100 x 5% = $5. Add them together and you have $105). In B.C. however, where like we said there is also a PST of 7%, you would pay ANOTHER $7 as well for a grand total of $112. That's 12 extra dollars added onto your $100 purchase in tax. Seems like a rip-off right? But let’s not forget that you don’t pay to go to school (if you go to public school) which after you buy your iPod you have a road to drive home on, which again you did not have to pay for (someone else did through their taxes before you were even born). So that's sales tax... what other taxes affect you?

Why Doesn't Your Paycheque Add Up?
If you add up how many hours you worked, don’t be surprised when your paycheque is actually LESS than the amount you were supposed to be paid. That’s because of the tax. Other than the taxes we pay on the purchases we make, if you have a job, you also have to pay ‘payroll taxes’ like CPP and EI, as well as income tax. Again, these taxes help pay for services that the government supplies to people. Like I said, it’s complicated and I won’t go into all of it, but you will see deductions come off the total amount of your paycheque.

This may seem like a raw deal every pay day, but there is some good to it. If you DON’T pay those deductions from each paycheque you will owe it all at once at the end of the year, during ‘tax season’. For those people, tax time can be the WORST time of the year because they have to PAY more taxes! Some people try to avoid paying by not filing their tax returns. Perhaps they can’t afford to pay because they didn’t plan for it all year. It is actually a criminal offence to not file if you owe the government money and you can be dealt with heavy fines or even go to jail!

I’m not trying to scare you (most teens don’t make enough money to have to file tax returns yet, so don’t worry – it probably won’t start until you get closer to 18 and have a regular part-time or full-time job). What I will say is this:

Money Tip #10
Don’t AVOID managing your money. Start now while you are young and you are only looking after small amounts of money. Make it a habit and when you get older, and have more, it will be easier for you to keep doing it. By avoiding managing your money you set yourself up for a miserable life (because you never know how much you have or don’t have to spend or save) and, as we’ve seen, it can cost you more and even land you in jail.

This article is a very brief intro to taxes so that you will know enough about them to understand why it is that you sometimes have to pay extra or don’t get all of your paycheque. In a future article we will talk more about some systems you can use to manage your money so that you never have to fear money or get super stressed out about things like taxes.

Enjoy the end of the school year and be diligent in managing your money!!!

~ Brian

Girls Can Do Anything Magazine

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