Glossary

THIS GLOSSARY CONTAINS SOME of the principal terms, measures, and concepts you will see in Tax Facts 10.

About indices

Index: a method of measuring the percentage changes from a base year of a certain item, such as the price, volume, or value of food or the dollar amount of taxes. In order to construct an index, the price, volume, or value of the particular item being indexed in each year is divided by the price, volume, or value of the item in the base year; it is then multiplied by 100. An index has a value of 100 in the base year. In this book the base year is 1961.

Consumer Price Index: measures the percentage change from a base year in the cost of purchasing a constant "basket" of goods and services representing the purchases by a particular population group in a specified time period. The Consumer Price Index, or CPI, as it is often called, reflects price movements of some 300 items. The CPI is calculated monthly by Statistics Canada (see below).

Consumer Tax Index: measures the percentage change from a base year in the average Canadian family's tax bill. The Consumer Tax Index or CTI is composed of federal, provincial, and municipal taxes. The CTI, calculated by The Fraser Institute, was introduced by the Institute for the first time in the first edition of Tax Facts, which was entitled How Much Tax Do You Really Pay?

Balanced Budget Tax Index: is the same as the Consumer Tax Index except that included in the calculation is the amount of tax that would have to be raised if governments did not issue debt and were in fact balancing their budgets. This index was introduced by The Fraser Institute for the first time in the second edition of Tax Facts, Tax Facts 2.

Some statistical terms

Average Canadian Family: represents a family that had average income in a particular year. The averages were constructed from Statistics Canada's expenditure and income surveys, details of which appear in the bibliography.

Family: refers to a group of persons dependent upon a common or pooled income for their major expenditure items and living in the same dwelling. The term also applies to a financially independent unattached individual living alone.


Family Expenditure Survey: refers to the Statistics Canada surveys which show patterns of family expenditure for Canada by selected characteristics such as urban and/or rural area, family type, life cycle, income, age of head, tenure, occupation of head, education of head, country of origin and, if applicable, immigrant arrival year.

Shelter expenditure: is included as one of the selected expenditure items in this book. It refers to expenditures on rented or owned living quarters on repairs to these quarters; on mortgage interest and on other housing, such as vacation homes, lodging at university or at remote work locations. It also includes expenditures on water and heating fuel.


Statistics Canada: is Canada's official statistical agency which is often referred to as "StatsCan." Statistics Canada provided much of the published and unpublished data for this book. For a detailed listing of these sources, see the bibliography.

Survey of Consumer Finances: refers to Statistics Canada's survey which details families' incomes and family characteristics. Information is given on head and spouse incomes (such as salaries, wages, and pensions), residence (province, rural/urban), personal characteristics (family size, age of head/spouse, education level and so forth), and labour-related characteristics (occupation, employment status, etc.).

Income concepts

Cash income: is the income that a family would report when completing a government survey, such as the Family Expenditure Survey, the Survey of Consumer Finances, or the Census form. It includes income that one receives regularly, such as salary or wage income (before tax) and payments from government such as old age security, unemployment insurance and family allowances. Families generally underreport their income so cash income estimates used in this study are "bumped up" using a Statistics Canada adjustment to include income that is often omitted when a family reports its income. Income which is often excluded is bond or bank interest and dividend income.

Deciles: all families were arranged according to total income before tax, from lowest income to highest, and then divided into ten groups, i.e. the first decile contains the 10 percent of families with the lowest incomes, the second decile contains the 10 percent of families with the second lowest incomes, etc.


Hidden income: is income that a family receives but probably does not consider to be a part of its income. Hidden income is largely made up of employer contributions to pension plans, medical premiums, and insurance plans. Another example is imputed non-farm rent. (For a more complete discussion of imputed non-farm rent see The Fraser Institute publication Rent Control-A Popular Paradox, p. 33).

Income from government: is income that a family receives as payment from the government, whereas taxes are payments to the government. Therefore, income from the government can be considered a "negative tax." It is often referred to as a transfer payment. It includes such items as family allowance payments, old age security payments, veterans' grants, etc.

Total income before tax: is the term used in this book to designate the amount of income the family would have received before paying tax. It is composed of cash income which includes income from government (transfer payments), and hidden income.

Transfer payments: see "income from government" in this section.

About taxes

Balanced budget tax rate: is the tax rate that Canadians would face if governments had to balance their budgets and finance all expenditures from current tax revenue instead of issuing debt.

Corporate profits tax: is the tax paid on the profits of a corporation. This is also referred to as the corporate income tax.

Deferred taxation: the debt incurred by the various levels of government to finance the expenditures that cannot be met by current tax revenue is, in effect, deferred taxation because the debts and interest on them must ultimately be paid out of future tax revenue.

Direct taxes: are taxes which are paid directly by the family. Examples of direct taxes are the personal income tax and provincial retail sales taxes. They are often referred to as explicit taxes.

Hidden taxes: are taxes that are concealed in the price of articles that one buys. Hidden taxes are also referred to as implicit taxes. The most well-known form of the hidden tax is the indirect tax. Examples of hidden taxes are the tobacco, fuel, and alcohol taxes and import duties.

Negative tax: see "income from government" in the previous section.

Progressive, proportional and regressive taxation: these are terms which refer to the proportionality of taxes on income. A tax is called proportional if it takes the same fraction of income from low income people as it does from high income people. (Unemployment Insurance payments and Canada Pension payments up to the maximum earnings level are examples of proportional taxes). A progressive tax is one that takes a greater proportion of income from high income people than from those with low incomes (income tax, for example). A regressive tax is one that takes a greater proportion of income from low income people than it does from high income people (sales tax, for example).

Social security taxes: are composed of both federal and provincial taxes. The federal category includes employer and employee contributions to public service pensions and to Unemployment Insurance. Provincial social security taxes include employer and employee contributions to public service pensions, employer and employee contributions to Workers' Compensation and Industrial Employees' Vacations. Also included in this category as taxes are payments to the Canada and Quebec Pension Plans and medical and hospital insurance premiums.

Tax burden: is the means of determining who ultimately pays tax and is synonymous with the term "tax incidence." Tax burden is measured by the decline in real purchasing power that results from the imposition of a tax.

Taxation powers under the constitution of Canada: the general scheme of taxation in the British North America Act might be summarized in this way:

1. the federal government is given an unlimited power to tax.

2. the provinces are also given what amounts to an unlimited power to tax "within the province," that is to say, an unlimited power to tax persons within their jurisdiction and to impose taxes in respect to property located and income earned within the province. But their taxing powers are framed in such a way as to preclude them from imposing taxes which would have the effect of creating barriers to inter-provincial trade, and generally from taxing persons and property outside the province.

info@fraserinstitute.ca You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.

If you know someone who would be interested in this web page, please enter their email address below, and we will forward this URL to them: Email Address:

Last Modified: Wednesday, October 20, 1999.