Discuss about the Case Study on Payroll Taxes of Nunavut.
Date: November 11, 2016
To: Mary Lapointe, the Chief Financial Officer
From: [Your name]
Re: Information on payroll taxes of Nunavut Province, Canada
In case of income tax on the payroll earned by the employees, there exists a mechanism of tax deduction at source. Under this mechanism, the employer who employs the individuals on payroll is required to deduct the tax from payroll of the employees at the time the payment is made. The employer is responsible to deduct and remit the tax on payroll to the government.
The payroll tax is computed at the rate of 2% on the gross payroll paid to the employee by the employer. However, no tax is levied on the payroll, if the employee normally works outside Nunavut and earns less than $5,000 by working temporarily in Nunavut. The employee is termed as normally working outside Nunavut if that employee works for more than 50% of the total employment period outside the provinces of Nunavut.
In case of employees working in Nunavut for 40 days, it could be observed that they normally work in Nunavut, thus, they will have to pay payroll tax on the entire gross pay earned. In this case the tax to be deducted by the employer would be $320 (40days*$400*2%). Further, in case of employees who worked for 10 days and 15 days in Nunavut out of the total period of working of 60 days, they will be termed as normally working outside Nunavut. Thus, these employees if earn less than $5000 would not be liable for payroll tax in Nunavut. In the current case, employees working for 10 days will not be liable for payroll tax because their pay is less than $5000. Further, the wages of employees working for 15 days amounts to $6000 (15days*$400), thus, they would be liable for tax deduction for an amount of $20 [($6,000-$5,000)*2%].
Thus, if the company hires guides from Alberta that is the province situated in western region in the Canada, they will be treated as employees working normally outside Nunavut if their working period in Nunavut in not more than the total employment period.
In regard to the provisions for reporting and remission the tax deducted at source, it has been observed that the government has prescribed limit of annual remuneration and the reporting period corresponding to this limit. However, an employer having seasonal business is required to report annually and remit the payroll taxes by 20th of the month following the month in which year ends. In the present case, Northern Travel Experience Company is having seasonal business, thus, the reporting requirement will be annually.