Government services are funded by income taxes and other taxes. Through salary deductions made by employers, employees pay income tax and contributions to various social programs in proportion to their income.
The income tax system is based on self-assessment, and individuals and companies submit returns each year showing how much tax they have paid and how much they owe, based on their earnings. The income tax return is also used to check admissibility for various social programs.
In Québec, individuals and companies must file two income tax returns, one with the Québec government and one with the Government of Canada. With the ongoing modernization of government services, individuals and companies can now submit electronic returns.
Almost all goods and services are subject to consumer taxes levied by the governments of Québec and Canada. The federal Goods and Services Tax (GST) is charged at 5%, and the Québec Sales Tax (QST) at 7.5%. In general, the taxes are not included in sticker prices.
Some goods, such as basic food items and prescription medication, are subject to GST and QST at a rate of 0% -- in other words, they are tax-free.
A small number of goods and services are exempted from tax – in other words, GST and QST do not apply at the time of the transaction. The list includes residential buildings, unless they are new, and most health and education services.
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