The five federal personal income-tax rates do not represent the complete
taxation of personal income in Canada because the provincial and
territorial governments also tax personal income. Quebec operates its
own income-tax system, whereas the other nine provinces simply use the
federal tax base (and federally distributed tax forms) to calculate
provincial income taxes according to their own legislated income-tax
rates. In all provinces other than Quebec, taxpayers pay a single amount
to the Canada Revenue Agency (CRA), which then distributes the total
between the federal government and each province according to the
amount collected from residents of that province.
The provincial taxation of income implies that Canada’s highest marginal
income-tax rate is not the highest federal rate, 33 percent. As of 2018, the
highest combined (provincial plus federal) marginal tax rates varied from
a low of 46 percent in Ontario to a high of 59 percent in Quebec.
Corporate Income Taxes
The federal corporate income tax is a flat-rate (proportional) tax on
profits as defined by the taxing authorities. As of 2018, the federal
corporate income-tax rate for large businesses was 15 percent; provincial
rates vary somewhat, but the average is about 12 percent. Small
businesses—those with business income below $500 000 per year—are
taxed at lower rates by both the federal and (most) provincial
governments.