We suspect that many of our readers still use, as a quick rule of thumb, a combined federal/provincial tax rate of 50%. Most of us are aware that this is not quite accurate, but with the rates always changing, differing from province to province, subject to surtaxes and with variable brackets, the 50% rate seems reasonable for quick estimates of liability.

That fact notwithstanding, we found a chart that appeared in the July issue of Canadian Tax Highlights, a monthly publication of the Canadian Tax Foundation, both interesting and illuminating. For example, the highest top marginal rate (Newfoundland) is 48.6%, a bit below the ubiquitous 50%. It isn't much below, but it does demonstrate that in all likelihood, many tax liability estimates are too high.

The 2002 and 2003 top marginal rates for individual income in respect of salary and interest, the two types of personal income that are not subject to special rules, are as follows: British Columbia, 43.7%; Alberta, 39%; Saskatchewan, 44.5%; Manitoba, 46.4%; Ontario, 46.4%; Quebec, 48.2%; New Brunswick, 46.8%; Nova Scotia, 47.3%; Prince Edward Island, 47.4%; Newfoundland and Labrador, 48.6%.

These rates take into account the surtaxes which are in place in four provinces. Thus, while the pro forma top rate in Ontario is 40.16% (29% federal plus 11.16% provincial), the surtaxes drive the combined rate to 46.4%. This is the same rate as in Manitoba, which has no surtaxes but which has a top personal rate of 17.4%.

The newsletter did not include the territories. But Nunavut, for example, has the second-lowest top rate, at 40.5%. Nunavut and New Brunswick are also alone in that the top rate for both the federal and provincial/territorial tax cuts in at about $103,000.

Technically, in every province the top rate given here kicks in at $103,000, the bottom end of the federal top rate. But it is worth noting that with the exceptions noted above, the provincial top rat cuts in at a much lower level. In British Columbia, this is around $87,000, but the top bracket in most provinces will start at $59,000 to $65,000.

Alberta is of course a situation unto itself, with the flat tax of 10% applied from dollar one of provincial taxable income.

We'd emphasize that we have been referring to top marginal tax rates. When one drops to lower income levels, there is a huge variety of tax rates and comparisons become quite difficult. This is due to widely differing levels of personal tax credits available in each province, so that knowing taxable income and the provincial tax rate does not really explain relative tax burdens. You have to know what the personal credits are worth.

In sum, using the 50% top tax rate "rule of thumb" may remain handy for swift mental calculations, but it quite significantly overstates the tax burden in every province. And that's a fact which is worth keeping in mind.

Arthur Drache, QC, is a partner in the Ottawa law firm of Drache, Burke-Robertson & Buchmayer.; adrache@drache.com