Complete Solutions Manual for Byrd & Chen's Canadian Tax Principles, 2023|2024 Edition, 1st edition by Gary Donell, Clarence Byrd,Ida Chen. Volume 1 Solutions included (Chap 1 - 10)
1 Introduction to Federal Taxation in Canada
2 Procedures and Administration
3 Income or Loss from an Office or ...
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Chapter 1 – Solutions to Assignment Problems
Solution to AP 1-1
Although there may not be one single solution to this problem, and student answers will be
limited to their preliminary understanding of income tax concepts and procedures, this
problem provides the basis for an interesting discussion of various qualitative characteristics.
Equity or Fairness The increase provides both horizontal and vertical equity. Individuals
with the same income will receive the same treatment, while individuals with different income
will be treated differently.
Neutrality The increase is not neutral. It targets high-income individuals and is likely to
influence their economic decisions.
Adequacy While the increase was intended to create additional revenues, there is some
evidence that the opposite has happened. This reflects the fact that high-income individuals
are sometimes in a position to move some, or all, of that income out of Canada (e.g., move
their residence to the U.S.) and to engage in complex income splitting transactions.
Flexibility With respect to flexibility, the rate can be changed at any time. However, as a
practical matter, such changes would need to be on an annual basis.
Simplicity and Ease of Compliance This change would not appear to present any
compliance issues.
Certainty The increase makes it clear to individual taxpayers the amount of income tax that
they will be required to pay.
Balance between Sectors Unfortunately, this change will increase the imbalance in the
Canadian tax system between corporate and individual taxpayers. Before the change,
individuals were already paying a disproportionate share of tax revenues. The intent of this
change was to further increase this imbalance.
International Competitiveness This increase further widens the gap between Canadian
and U.S. personal income tax rates, making Canada far less competitive with the U.S.
However, Canadian income tax rates are not out of line with income tax rates in other
industrialized countries.
1-1
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