#6. (10 marks) Provide short answers to the following questions. (a) True or Fal
ID: 2579745 • Letter: #
Question
#6. (10 marks) Provide short answers to the following questions. (a) True or False? The reliance on the invoice-credit method for the Canadian goods and services tax (GST) makes it harder for businesses to evade this tax. Briefly explain. (b) Assume that both Canada Pension Plan (CPP) and Employment Insurance (EI) are benefit- linked payroll taxes. Briefly explain why the Canadian federal government needs to have several pension programs - Canada Pension Plan (CPP), Old Age Security (OAS) and Guaranteed Income Supplement (GIS) - and only one Employment Insurance (EI) programExplanation / Answer
a) The goods and services tax is defined in law at Part IX of the Excise Tax Act. GST is levied on supplies of goods or services purchased in Canada and includes most products, except certain politically sensitive essentials such as groceries, residential rent, and medical services, and services such as financial services. Businesses that purchase goods and services that are consumed, used or supplied in the course of their "commercial activities" can claim "input tax credits" subject to prescribed documentation requirements (i.e., when they remit to the Canada Revenue Agency the GST they have collected in any given period of time, they are allowed to deduct the amount of GST they paid during that period). This avoids cascading. In this way, the tax is essentially borne by the final consumer. This system is not completely effective, as shown by criminals who defrauded the system by claiming GST input credits for non-existent sales by a fictional company. Exported goods are "zero-rated", while individuals with low incomes can receive a GST rebate calculated in conjunction with their income tax.
Based on revenue from your taxable supplies and those of your associates. It includes most zero-rated supplies, but does not include revenue from:
• supplies made outside Canada
• zero-rated exports
• zero-rated supplies of financial services
• exempt supplies
• taxable sales of capital real property
• goodwill
b) The Canada Pension Plan (CPP) is a contributory, earnings-related social insurance program. It forms one of the two major components of Canada's public retirement income system, the other component being Old Age Security (OAS). Other parts of Canada's retirement system are private pensions, either employer-sponsored or from tax-deferred individual savings. As of September 2017, the CPP Investment Board manages over C$328.2 billion in investment assets for the Canada Pension Plan on behalf of 20 million Canadians, making it among the ten largest sovereign wealth funds in the world. The CPP also provides disability pensions to eligible workers who become disabled in a severe and prolonged fashion, and survivor benefits to survivors of workers who die before they begin receiving retirement benefits. If an application for disability pension is denied, an appeal can be made for reconsideration, and then to the Canada Pension Plan / Old Age Security Review Tribunals or Pension Appeals Boards (POA).
When the contributor reaches the normal retirement age of 65, the CPP provides regular pension benefit payments to the contributor. Currently, this is equal to 25% of the earnings on which CPP contributions were made over the entire working life of a contributor from age 18 to 65 in constant dollars. However, under changes being phased in by 2025, the pension benefit will rise to 33% of earnings on which contributions were made, and the maximum amount of income covered by the CPP will rise from $54,900 to about $82,700.
There is a general drop out provision that enables the lower-earnings years in a contributor's contributory period to be dropped from the calculation of the average. In 2014, the lowest 17% of earnings will be dropped in this way, accounting for up to eight years of contributory earnings.
In March 2016, average monthly benefits for new retirement pension was just over $550.00 per month and the maximum amount was $1,092.50. Monthly benefits are adjusted every year based on the Consumer Price Index. CPP benefit payments are taxable as ordinary income.
An application must be filed at least six months in advance in order to receive CPP benefits, and there is a provision for starting benefits anytime between the age of 60 to 70. Benefits are adjusted accordingly. Historically, the adjustment rate was 0.5% for each month before or after one's 65th birthday. From 2012 to 2016, the Plan is gradually changing the early pension reduction from 0.5% to 0.6% for each month you receive it before age 65. This means that by 2016, an individual who starts receiving their CPP retirement pension at the age of 60 will receive 36% less than if they had taken it at 65. Conversely, as of 2013, the adjustment rate for retiring after age 65 has increased to 0.7% for each month that one delays in receiving it up to age 70 (8.4% per year).
Virtually every Canadian contributes to the Canada Pension Plan on earnings from employment or self-employment between specified minimum and maximum levels.The contributions you make are recorded from the time you are 18 until you begin receiving your Canada Pension Plan pension. Generally, the contributions over this entire period determine the amount of benefits you will receive.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.