Module 1 summary

Question 1

The most desirable characteristics of an income tax system are:

Answer 1

1. horizontal equity
2. vertical equity
3. neutrality
4. flexibility
5. certainty
6. feasibility and efficiency
7. simplicity resulting in less compliance costs for taxpayers

Question 2

The most important guidelines for evaluating tax policy are:

Answer 2

• fairness and equity
• simplicity and compliance
• balance
• stability
• economic growth
• international competitiveness

Question 3

Important Interpretive Sources of the Income Tax Act:

Answer 3

1. Judicial decisions (common law)
2. CRA Information Circulars and Interpretation Bulletins
3. CRA Technical Interpretations
4. CRA Information Booklets and Income Tax Technical News
5. Department of Finance Technical Notes

Question 4

Concept of Income and Role of GAAP

Answer 4

• Taxable income is not the same as GAAP income
• Taxable income is not the same as income defined by economists
• GAAP might be employed to interpret Income Tax Act in some situations

Question 5

3 Types of HST/GST Supplies:

Answer 5

• 13% (Ontario) - most goods and services
• 0% - exported goods and services, groceries, medical devices and prescription drugs
• Tax exempt - financial services, educational services, residential rent, health care services and child care services.
• Input Tax Credit (ITC) can be claimed for providing 13% and 0% supplies.