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Topic: Money and Finances F1.6 – Government Taxes

Ontario Curriculum Expectation:

5.F1.6 describe the types of taxes that are collected by the different levels of government in Canada, and explain how tax revenue is used to provide services in the community.

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Government Taxes

For many items people buy in stores, the price they pay at the cash register is more than the price shown on the price tag or the store shelf. Why? People must pay tax when they buy various items.

What Is a Tax?

You pay property tax if you own a house.

A tax is money that people and businesses pay to the government. All levels of government (federal, provincial or territorial, and municipal) need money to pay for services that they provide to people. Governments get money to pay for services by collecting taxes.

Tax money is also collected by band councils, which are elected to manage certain First Nations communities.

Different levels of government collect taxes in different ways.

Municipal Taxes

These taxes are collected by a city government. One example of a municipal tax is called property tax. People in the city who own property (such as a house, other kinds of buildings, or land with no buildings) pay a property tax each year. The tax is based on how much the property is worth. For example, people with expensive houses pay more property tax than people with less expensive houses. The fee that people pay to get a dog or cat license is also a tax that is collected by a municipal government.

Provincial or Territorial Taxes

You can see the sales tax on any receipt.

These taxes are collected by the government of a province or territory. One example of a provincial or territorial tax is sales tax — the tax people pay when purchasing certain items (goods) or services. (A service is something a person or company does for you.) Another example is income tax. Each year, people pay a percentage of the money they have earned. (The money people earn is called income.) Provincial and territorial governments also collect a health services tax, which pays for various kinds of health care for people in the province or territory.

Federal Taxes

These taxes are collected by the federal government in Ottawa. Like provincial and territorial governments, the federal government collects sales tax and income tax. Some of the sales tax and income tax people pay goes to their provincial or territorial government, and some goes to the federal government.

The government pays for your check-up with a doctor.

How Is Tax Money Used?

Governments use tax money to provide various services. Below are just a few examples.

Education: Tax money pays for such things as schools, school staff, textbooks, and other supplies.

Health care: Many of the health services people use are paid for by tax money. For example, when you go to your doctor for a check-up, your parents do not pay the doctor—the government uses tax money to pay the doctor.

Transportation: Building and repairing roads and bridges are services provided by the government and paid for with tax money. Governments also contribute tax money to help pay for local transportation services, such as city buses and subways. (The money people pay to use a city bus or subways does not cover all the costs of running the bus or subway system.)

Examples of other important services that tax money pays for include garbage collection and recycling, protecting the environment, and the services provided by police and fire departments.

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