Starting tomorrow, Canadians have paid off the total tax bill
imposed on them by government and can finally start working for
themselves, according to The Fraser Institute's annual
Tax Freedom Day
"If you look at the average Canadian family's total tax bill,
each and every dollar they earn before June 20 would be required
to pay the taxes owing to all levels of government. It takes
until June 20 before they begin earning money for themselves,"
said Niels Veldhuis, The Fraser Institute's Director of the
Centre for Tax Studies.
The Fraser Institute calculates
Tax Freedom Day
to provide a comprehensive indicator of the total amount of taxes
paid by the average Canadian family to all three levels of
government: federal, provincial, and local.
The taxes used to compute Tax Freedom Day include income taxes,
property taxes, sales taxes, profit taxes, health, social
security and employment taxes, import duties, license fees, taxes
on the consumption of alcohol and tobacco, natural resource fees,
fuel taxes, hospital taxes and a host of other levies.
An Earlier Tax Freedom Day
This year Tax Freedom Day falls four days earlier than in 2006.
The latest Tax Freedom Day in Canadian history was in 2000, when
it fell on June 25. Tax Freedom Day moved forward to June 17 in
2001 before steadily retreating to June 24 in 2005 and 2006.
"Even with the recent improvements, Tax Freedom day still falls
almost two months later than in 1961, the earliest year for which
we have calculations," Veldhuis said.
Tax Freedom Day arrives earlier this year in part because of the
federal government's 2006 reduction of the Goods and Services Tax
(GST) to six per cent from seven per cent, Veldhuis said. While
the sales tax reduction took place in mid-2006, Canadians receive
the benefits for an entire year in 2007. Additionally, several
provincial governments reduced taxes in 2007.
But Veldhuis cautions that an earlier Tax Freedom Day can also be
generated by cautious revenue projections on the part of Canadian
governments. Federal and provincial budget forecasts of how much
revenue they will collect are one of the key components of the
Tax Freedom Day calculations. Low projections for tax revenue,
especially relative to projected increases in personal incomes,
can result in Tax Freedom Day appearing to fall earlier in the
Total Tax Bill Has Increased
In 2007, the average Canadian family (with two or more
individuals) will earn $83,775 and pay a total of $38,992 in
taxes, for a total tax bill amounting to 46.5 per cent of its
The average Canadian family will see its income increase by 3.4
per cent ($2,760) between 2006 and 2007 while the total tax bill
increases by 1.5 per cent ($580). The largest increase among the
myriad of taxes comes in the form of property taxes, up $279 for
the average Canadian family. Other notable increases come in
profit taxes ($256) and social security taxes ($118). Liquor
taxes and natural resource levies both decreased between 2006 and
Tax Freedom Day Among the Provinces
Tax Freedom Day varies from province to province, depending on
the taxation levels of each provincial government. Alberta enjoys
the earliest Tax Freedom Day on June 1, followed by New Brunswick
and Prince Edward Island (June 14), BC and Manitoba (June 16),
Ontario and Nova Scotia (June 19), and Saskatchewan (June 22).
Quebec has the second-latest Tax Freedom Day, on June 26, while
Newfoundland and Labrador wait the longest, until July 1.
The Atlantic Provinces historically have had some of the
country's earliest Tax Freedom Days in part because a large share
of their total revenue is transferred from other provinces
through the federal government's equalization payments. Tax
Freedom Day in those provinces, as well as in Manitoba,
Saskatchewan and Quebec, comes earlier than it would without
All Canadian provinces, except New Brunswick and Newfoundland and
Labrador saw Tax Freedom Day arrive earlier in 2007 than in 2006
with the Western provinces experiencing the greatest
Taxpayers in Newfoundland and Labrador celebrate Tax Freedom Day
six days later than in 2006. But Veldhuis notes that the later
arrival of Tax Freedom Day in Newfoundland and Labrador is the
result of a significant increase in provincial revenues from
natural resource royalties.
There is a question as to whether natural resource royalties are
actually a tax or simply the conversion of an asset (natural
resources such as oil and gas) into an income stream for the
province. When natural resource revenues are excluded from the
calculation, the impact of important personal tax relief brought
in by the Newfoundland and Labrador government becomes clear as
Tax Freedom Day arrives on June 13, six days earlier than in
Removing natural resource revenues from the 2007 calculations
also results in earlier Tax Freedom Days for other resource-rich
provinces: Alberta gains 13 days, Saskatchewan gains nine days,
and British Columbia would celebrate Tax Freedom Day six days
"It is virtually impossible for the average Canadian to know how
much they truly pay in taxes. The aim of Tax Freedom Day is to
give people a true indication of the amount of money we pay in
taxes each year," Veldhuis said.