Canadian Financial System

Canadian Financial System

Canadian Financial System : In order to properly understand the system of Canadian finances, it is absolutely necessary to comprehend the nature of the Canadian tax system. Prior to World War I, the majority of government revenue originated in the form of taxes on imported and exported goods, known as tariffs; however, in order to fund the First World War, the government instituted a federal income tax, an idea that was originally meant to be temporary, and it has since evolved into a progressive tax system that, along with a sales tax, produces around 70 percent of the federal bureaucratic revenue.

In addition to these federal taxes, every province institutes its own forms of income, property, and sales taxes, and the average middle class family with two children pays approximately 32 percent of its total income to the government, federal or provincial.

A report from the World Economic Forum in 2008 named the Canadian banks as the safest and most prolific banks in the world; though this is largely accredited to the early precedent of minimal government interference in the banks, the Canadian bureaucracy still lightly regulates nearly every aspect of the country’s chartered banks to prevent economic meltdowns such as the recent U.S. subprime mortgage crisis.

Of these banks, the Royal Bank of Canada is the largest and wealthiest, but banking is only one of this institution’s multiple financial programs as it also offers investment and mortgage services. Founded in 1864 as the Merchants Bank, the firm slowly evolved and changed its name to the Royal Bank of Canada after receiving a federal charter, and, now with over 17 million clients worldwide, this bank offers various financial services to almost any Canadian who applies and many internationals.

When calculating total income for federal and provincial taxes, only half of the income earned from capital gains, as in dividends paid on investments, is accounted for. This lowered tax on dividends facilitates investments in real-estate, government and corporate bonds, and the stock market, and, in turn, it stimulates the economic prosperity of the entire nation.

The Canadian economy continues to flourish because of their comparatively low tax burden, and the Toronto Stock Exchange, or TSX, is evidence of this. The TSX is the most extensive stock exchange in Canada, and it is the world leader in the trading of stock in companies that mine oil, natural gas, or other precious natural resources. This exchange currently has the eighth largest total market capitalization in the world, and it continues to grow with the increasing value of oil and natural gas in the international economy.

Conclusively, the system of Canadian finance offers multiple opportunities through investment and personal entrepreneurship because the tax system has been designed to facilitate these economic practices and, through this, stimulate the economy. Additionally, competent banking prevents the continuation of irresponsible practices, and it thereby creates a stable atmosphere for fiscal investment and nationwide growth.