Question

Explain the tax concept of 'integration" (use citations))

Answer 1

Carter Commission in the Year 1971 Introduced this concept which says that income should be taxed at the same rate Irrespective of how it was earned. To Introduce this Canadian income tax act has came up with several Integration mechanisms.

This Means that all the personal and corporate income will be taxed at a Same Rate .

This Integration has Two Components

1. First is Corporate Income (Business Income) - For a Canadian Controlled Private Corporation (CCPC) which earns business income are taxed at 15% However for the Personal Income is taxed at 50%. To Maintain the Integration the Remaining 35% is charged Through the Dividend tax Credit Mechanism.
2. Second relates to passive or investment income earned in a corporation. This is to ensure that no tax benefit for earning income in a corporation by paying lower taxes.