Module 1: Basics of Taxation

How your tax dollars are spent

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As mentioned, many of the benefits Canadians enjoy (and sometimes take for granted) are made possible through taxes. Canada's tax systems pay for such things as roads, public utilities, education, health care, economic development, cultural activities, defence, and law enforcement.

Tax revenue helps redistribute wealth to such beneficiaries as lower-income families, charities, students, retirees, and people with disabilities. Tax revenue provides social services such as Old Age Security benefits, Employment Insurance benefits, Canada Child Tax Benefit payments, and Universal Child Care Benefit payments. It also offers incentives to large and small businesses and boosts the economy in other ways.

Governments collect taxes to pay for the facilities, services, and programs that they provide. But what sorts of things are we talking about?

To answer this question, let's look at federal expenses for the fiscal year of 2005-2006.

Information on government expenditures for 2005-2006 is contained in the annual financial report of the Government of Canada. You can get more information about this report.

In 2005-2006, the federal government spent:

• 25.2% of its budget on payments to people, including:
  • Employment Insurance payments; and
  • Old Age Security benefits.
    
• 19.5% on transfers of money to other levels of government (such as the provinces and territories) for their:
  • health care services;
  • post-secondary education programs; and
  • social assistance and social services to low-income Canadians.
    
• 11.9% on other transfers, including programs for:
  • veterans and native people;
  • industrial and regional development;
  • job creation and training;
  • agriculture, science and technology, energy, and transportation;
  • emergency aid and relief; and
  • grants and contributions for individuals and organizations.
    
• 7.2% on defence (for the army, navy, and air force).
  
• 3.4% on transfers to Crown corporations, including:
  • the Canada Mortgage and Housing Corporation;
  • the Canadian Broadcasting Corporation; and
  • cultural agencies such as the National Film Board and national museums.
    
• 16.6% on operating and capital expenses. This means what it costs to administer the government, deliver specific services to the public, and carry out research.
  
• 16.2% on interest on the public debt, which includes money the country owes to foreign banks and other agencies. Paying this debt is important to Canada's future.

How your tax dollars are spent

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