Provincial Income Tax Comparison for Small Businesses
Part 1: How Much You Pay Depends on Where Your Business Is
Income tax season is often a season of dread for small business owners. No one enjoys paying bills, and for many small businesses, paying the balance owing CCRA (Canada Customs and Revenue Agency) is especially onerous. It won't make paying your income tax any easier, but I thought it would be interesting to see how income tax rates compare across the country.
Income tax season is often a season of dread for small business owners. No one enjoys paying bills, and for many small businesses, paying the balance owing CCRA (Canada Customs and Revenue Agency) is especially onerous. It won't make paying your income tax any easier, but I thought it would be interesting to see how income tax rates compare across the country. For comparison purposes, I've invented a taxpayer named Ben Doe, who I've tried to make as representative as possible. A sole proprietor, as so many small business people are, Ben is a consultant, who runs a service oriented business out of his home. I chose to use a home based business for my example because the number of home based businesses is growing rapidly, and because the cost of non-residential office space or business premises varies so
much across Canada. Ben is married (as most Canadian entrepreneurs
are), and has two children. His wife works, so he is not allowed to claim her as a dependent. Thanks to the elegance of my QuickTax software, I've been able to run several different scenarios for Ben, at several different income levels. First, let's suppose that Ben had a gross income of $40,000 in 2000 (which is close to the average income of a Canadian small business man). As a contractor, Ben is responsible for paying his own Canada Pension Plan (CPP) contributions. Ben wasn't able to afford an RRSP for 2000. In this first scenario, his business expense deductions, including a Capital Cost Allowance (CCA) on equipment for $1,210, totaled $10,260. Because
Ben runs his consulting business out of his home, he was also able to claim $571.30 as business-use-of-home expenses. Other than the expenses listed on the Statement of Business Activities form (T2124), Ben's only other allowable deduction was $100 for
professional dues. For 2000, then, Ben's taxable income was $29,068.70. It doesn't seem like a lot, does it? Let's see what Ben is going to have to pay on this princely sum in each province and territory across Canada.
** The Northwest Territories
and Nunavut are separate regions, but currently have the same income tax
structure.
* These numbers don't add up
because both the Northwest Territories and Nunavut give residents a territorial
tax credit of $320.69
on this amount of income.
Next page > Comparing The Income Tax
Bill in Each Province and Territory > Page 1, 2,
3
B.C.
AB
Sask
MB
Ontario
Quebec
Federal
$3,372.04
$3,372.04
$3,372.04
$3,372.04
$3,372.04
$3,372.04
CPP Contribution
$2,002.16
$2,002.16
$2,002.16
$2,002.16
$2,002.16
$2,045.87
Provincial
$1,640.98
$1,629.04
$2,110.07
$1,819.59
$947.06
$2,265.97
Balance
Owing
$7,015.18
$7,003.24
$7,484.27
$7,193.79
$6,321.26
$7,121.29
Average
Tax Rate
24%
24%
26%
25%
22%
24%
NB
NS
PEI
Newfoundland
NW
Territories/ Nunavut**
Yukon
Federal
$3,372.04
$3,372.04
$3,372.04
$3,372.04
$3,372.04
$3,372.04
CPP Contribution
$2,002.16
$2,002.16
$2,002.16
$2,002.16
$2,002.16
$2,002.16
Provincial
$1,971.65
$1,937.93
$1,938.92
$2,201.10
$1,517.42
$1,652.30
Balance
Owing
$7,345.85
$7,344.84
$7,313.12
$7,575.30
$6,570.93*
$7,026.50
Average
Tax Rate
25%
25%
25%
26%
24%
24%
