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Encyclopedia > Taxation in Canada
Public finance
This article is part of the series:
Finance and Taxation
Taxation
Income tax  ·   Payroll tax
CGT  ·   Stamp duty
Sales tax  ·   VAT  ·   Flat tax
Tax, tariff and trade
Tax incidence
Tax rate  ·   Proportional tax
Progressive tax  ·   Regressive tax
Tax advantage

Economic policy
Monetary policy
Central bank  ·   Money supply
Fiscal policy
Spending  ·   Deficit  ·   Debt
Trade policy
Tariff  ·   Trade agreement
Finance
Financial market
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The level of Taxation in Canada is average among Organisation for Economic Co-operation and Development (OECD) countries. Currently, approximately 70% of the Canadian government's income comes from taxation, the rest from tariffs, fees, and investments. This article does not cite any references or sources. ... Image File history File linksMetadata Size of this preview: 800 × 600 pixelsFull resolution (2816 × 2112 pixel, file size: 2. ... Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        An income tax is a tax levied on the financial income... This article is the current Taxation Collaboration of the Month. ... A capital gains tax (abbreviated: CGT) is a tax charged on capital gains, the profit realized on the sale of an asset that was purchased at a lower price. ... Stamp duty is a form of tax that is levied on documents. ... A sales tax is a consumption tax charged at the point of purchase for certain goods and services. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Value added tax (VAT), or goods and services tax (GST), is... A flat tax, also called a proportional tax, is a system that taxes all entities in a class (typically either citizens or corporations) at the same rate (as a proportion on income), as opposed to a graduated, or progressive, scheme. ... The tax, tariff and trade laws of a political region, state or trade bloc determine which forms of consumption and production tend to be encouraged or discouraged. ... First discussed by the Physiocrats in France, tax incidence is the analysis of the effect of a particular tax on the distribution of economic welfare. ... A tax (also known as a dutyor Zakat in islamic economics) is a charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (e. ... A flat tax, also called a proportional tax, is a system that taxes all entities in a class (typically either citizens or corporations) at the same rate (as a proportion of income), as opposed to a graduated, or progressive, scheme. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        A progressive tax is a tax imposed so that the effective... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        A regressive tax is a tax imposed so that the tax... Tax advantage refers to the economic bonus which applies to certain accounts or investments that are, by statute, tax-reduced, tax-deferred, or tax-free. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links Flag_of_the_British_Virgin_Islands. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links Flag_of_Germany. ... Image File history File links Flag_of_Hong_Kong. ... Image File history File links Flag_of_India. ... Image File history File links Flag_of_Indonesia. ... Image File history File links Flag_of_the_Netherlands. ... Image File history File links Flag_of_New_Zealand. ... Image File history File links Flag_of_Peru. ... Image File history File links Flag_of_Ireland. ... Image File history File links Flag_of_Russia. ... Image File history File links Flag_of_Singapore. ... Image File history File links Flag_of_Tanzania. ... Image File history File links Flag_of_the_United_Kingdom. ... Image File history File links This is a lossless scalable vector image. ... Image File history File links This is a lossless scalable vector image. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Comparison of tax rates around the world is a difficult and... This table lists OECD countries by total tax revenue as percentage of GDP (as of 2005). ... Not to be confused with Political economy. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Monetary policy is the process by which the government, central bank... In macroeconomics, money supply (monetary aggregates, money stock) is the quantity of currency and money in bank accounts in the hands of the non-bank public available within the economy to purchase goods, services, and securities. ... Fiscal policy is the economic term that defines the set of principles and decisions of a government in setting the level of public expenditure and how that expenditure is funded. ... Government spending or government expenditure consists of government purchases, which can be financed by seigniorage (the creation of money for government funding, at a heavy price of high inflation and other possibly devastating consequences), taxes, or government borrowing. ... A budget deficit occurs when an entity (often a government) spends more money than it takes in. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Government debt (also known as public debt or national debt) is... This article does not cite any references or sources. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        For other uses of this word, see tariff (disambiguation). ... A trade pact is a wide ranging tax, tariff and trade pact that usually also includes investment guarantees. ... Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. ... This article does not cite any references or sources. ... There are two basic financial market participant catagories, Investor vs. ... Domestic credit to private sector in 2005 Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. ... Personal finance is the application of the principles of finance to the monetary decisions of an individual or family unit. ... This article does not cite any references or sources. ... For other uses, see Bank (disambiguation). ... The Organisation for Economic Co-operation and Development (OECD), (in French: Organisation de coopération et de développement économiques; OCDE) is an international organisation of those developed countries that accept the principles of representative democracy and a free market economy. ... Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        For other uses of this word, see tariff (disambiguation). ...

Contents

Administration

Federal taxes are collected by the Canada Revenue Agency (CRA), formerly known as "Revenue Canada" or the "Canada Customs and Revenue Agency". Example of a cheque from the Canada Revenue Agency The Canada Revenue Agency (CRA) administers: tax laws for the Government of Canada and for most provinces and territories; international trade legislation; and various social and economic benefit and incentive programs delivered through the tax system. ...


Under "Tax Collection Agreements", CRA collects and remits to the provinces:

  • Provincial personal income taxes on behalf of all provinces except Quebec, so that individuals outside of Quebec file only one set of tax forms each year for their federal and provincial income taxes.
  • Corporate taxes on behalf of all provinces except Quebec, Alberta and Ontario.
  • Provincial sales taxes in New Brunswick, Nova Scotia and Newfoundland and Labrador.

The Ministère du revenu du Québec collects the GST in Quebec on behalf of the federal government, and remits it to Ottawa.


History

When the Canadian federation was formed in 1867, the British North America Act attempted to create a federal government with unlimited revenue gathering abilities. The federal government was entrusted with the high cost programs of the time, most notably defence and the building of railways. The provinces were given limited taxation power as they could only impose direct taxes such as sales taxes, property taxes, and income taxes (although they also maintained control over most resource revenues as well). At the time, it was believed that the provinces had adequate revenue sources as major areas of provincial government spending today were generally not funded by the government (such as social assistance and medical care). The British North America Acts 1867–1975 are a series of Acts of the British Parliament dealing with the government of Canada. ...


For the early part of Canadian history most federal government revenue came from tariffs on trade with excise taxes making up the rest of the government's funding. The largest source of provincial funding was licenses, permits, and transfers of funds from the federal government. The first corporate taxes were introduced at the end of the nineteenth century. Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        For other uses of this word, see tariff (disambiguation). ...


A crisis developed during the Great Depression because the provinces were responsible for skyrocketing welfare costs, but could not raise enough revenue since the taxes permitted to the provinces were so dependent on the health of the economy. The federal government still had considerable revenues however, which resulted in a system of transfer payments between the two levels of government. The transfer payments are still in place today. For other uses, see The Great Depression (disambiguation). ... In political science and economics, a transfer payment is a payment of money from a government or any other organization to an individual, a group or another order of government for which no good or service is directly required in return. ...


The First World War had mostly been financed by traditional means, but in 1917, a tax on income was introduced as a temporary measure to fund the war. The income tax has since become a permanent feature of the Canadian tax system. The Second World War led to dramatic change in the tax system. The percentage of Canadian government revenue from indirect taxes fell from 90% in 1913 to less than 40% by 1946. Instead, Canadians began to pay income taxes and direct taxes has since provided the greatest bulk of government funding. “The Great War ” redirects here. ... Combatants Allied powers: China France Great Britain Soviet Union United States and others Axis powers: Germany Italy Japan and others Commanders Chiang Kai-shek Charles de Gaulle Winston Churchill Joseph Stalin Franklin Roosevelt Adolf Hitler Benito Mussolini Hideki Tōjō Casualties Military dead: 17,000,000 Civilian dead: 33,000...


Income taxes

Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        Income taxes in Canada constitute the majority of the annual revenues...

Personal income taxes

Both the federal and provincial governments have imposed income taxes on individuals, and these are the most significant sources of revenue for those levels of government accounting for over 40% of tax revenue. The federal government charges the bulk of income taxes with the provinces charging a somewhat lower percentage. Income taxes throughout Canada are highly progressive with the high income residents paying a significantly higher percentage than the low income residents. Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank   Money supply Fiscal policy Spending   Deficit   Debt Trade policy Tariff   Trade agreement Finance Financial market Financial market participants Corporate   Personal Public   Banking   Regulation        An income tax is a tax levied on the financial income... A progressive tax, or graduated tax, is a tax that is larger as a percentage of income for those with larger incomes. ...


Where income is earned in the form of a capital gain, only half of the gain is included in income for tax purposes; the other half is not taxed. In finance, a capital gain is profit that results from the appreciation of a capital asset over its purchase price. ...


Federal and provincial income tax rates are shown at Canada Revenue Agency's website.


Personal income tax can be deferred in a Registered Retirement Savings Plan (RRSP), a tax sheltered savings account or mutual fund that is intended to help individuals save for their retirement. . ...


To encourage individuals to use public transit, ease traffic congestion in urban areas and improve the environment, the 2006 federal budget proposed to allow individuals to claim a non-refundable tax credit (15.25% for 2006 and 15% for 2007 and subsequent years) for the cost of monthly public passes or those passes of a longer duration (e.g., annual passes). The credit will apply to the cost of public transit passes that is in respect of transit on or after July 1, 2006.


This measure will encourage public transit use by providing $150 million in 2006–07 and $220 million in 2007–08 in benefits to approximately two million Canadians who make a sustained commitment to use this environmentally friendly mode of transportation. An individual who purchases passes costing $80 per month throughout the year will receive up to about $150 in federal tax relief for the year.


Corporate taxes

Companies and corporations pay tax on profit income and on capital. These make up a relatively small portion of total tax revenue. Tax is paid on corporate income at the corporate level before it is distributed to individual shareholders as dividends. A tax credit is provided to individuals who receive dividend to reflect the tax paid at the corporate level. This credit does not eliminate double taxation of this income completely, however, resulting in a higher level of tax on dividend income than other types of income. (Where income is earned in the form of a capital gain, only half of the gain is included in income for tax purposes; the other half is not taxed.) Corporations may deduct the cost of capital following capital cost allowance regulations. Capital has a number of related meanings in economics, finance and accounting. ... It has been suggested that ex-dividend date be merged into this article or section. ... In finance, a capital gain is profit that results from the appreciation of a capital asset over its purchase price. ... Capital Cost Allowance is the means by which Canadian businesses may claim deduct depreciation expense. ...


Starting in 2002, several large companies converted into "income trusts" in order to reduce or eliminate their income tax payments, making the trust sector the fastest-growing in Canada as of 2005. Conversions were largely halted on October 31, 2006, when Finance Minister Jim Flaherty announced that new income trusts would be subject to a tax system similar to that of corporations, and that these rules would apply to existing income trusts after 2011. An income trust is an investment trust that holds income-producing assets. ... 2005 is a common year starting on Saturday of the Gregorian calendar. ... James Michael Jim Flaherty, PC, BA, LL.B, MP (born December 30, 1949) is Canadas Minister of Finance; he had formerly served as Ontarios Minister of Finance. ...

See also: Income trust

An income trust is an investment trust that holds income-producing assets. ...

Sales taxes

See also: Sales taxes in Canada

The federal government levies a multi-stage sales tax of 6% on goods and services (decreasing to 5% effective 1 January 2008), that is called the Goods and Services Tax (GST), and, in some provinces, the Harmonized Sales Tax (HST). The GST/HST is similar to a value-added tax. In Canada there are three types of sales taxes: provincial sales taxes, the federal GST and the HST in Atlantic Canada. ... is the 1st day of the year in the Gregorian calendar. ... 2008 (MMVIII) will be a leap year starting on Tuesday of the Anno Domini (common) era, in accordance with the Gregorian calendar. ... The Canadian Goods and Services Tax (GST) (French: Taxe sur les produits et services, TPS) is a multi-level value-added tax introduced in Canada on January 1, 1991, by Prime Minister Brian Mulroney and finance minister Michael Wilson. ... In Canada, the Harmonized Sales Tax (HST) combines the Goods and Services Tax (GST) and Provincial Sales Tax (PST) into a single sales tax. ... Value added tax (VAT) is a sales tax levied on the sale of goods and services. ...


All provincial governments except Alberta levy sales taxes as well. The provincial sales taxes of Nova Scotia, New Brunswick and Newfoundland and Labrador are harmonized with the GST. That is, a rate of 14% HST (13% effective 1 January 2008) is charged instead of separate PST and GST. Both Quebec and Prince Edward Island apply provincial sales tax to the sum of price and GST. The territories of Nunavut, Yukon and Northwest Territories do not charge provincial sales tax. For other uses, see Alberta (disambiguation). ... Motto: Munit Haec et Altera Vincit (Latin: One defends and the other conquers) Capital Halifax Largest city Halifax Regional Municipality Official languages English (de facto) Government Lieutenant-Governor Mayann E. Francis Premier Rodney MacDonald (PC) Federal representation in Canadian Parliament House seats 11 Senate seats 10 Confederation July 1, 1867... This article is about the Canadian province. ... This article is about the Canadian province of Newfoundland and Labrador. ... is the 1st day of the year in the Gregorian calendar. ... 2008 (MMVIII) will be a leap year starting on Tuesday of the Anno Domini (common) era, in accordance with the Gregorian calendar. ... For the Canadian federal electoral district, see Nunavut (electoral district). ... This article is about Yukon Territory in Canada. ... For the former United States territory, see Northwest Territory. ...


Provincial and federal sales tax rates at the retail level on goods and some services are as follows:

For other uses, see Alberta (disambiguation). ... Motto: Splendor sine occasu (Latin: Splendour without diminishment) Capital Victoria Largest city Vancouver Official languages English (de facto) Government Lieutenant-Governor Steven Point Premier Gordon Campbell (BC Liberal) Federal representation in Canadian Parliament House seats 36 Senate seats 6 Confederation July 20, 1871 (6th province) Area  Ranked 5th Total 944... Motto: Gloriosus et Liber (Latin: Glorious and free) Capital Winnipeg Largest city Winnipeg Official languages English French (de facto) Government Lieutenant-Governor John Harvard Premier Gary Doer (NDP) Federal representation in Canadian Parliament House seats 14 Senate seats 6 Confederation July 15, 1870 (5th) Area  Ranked 8th Total 647,797... Motto: Ut Incepit Fidelis Sic Permanet (Latin: Loyal she began, loyal she remains) Capital Toronto Largest city Toronto Official languages English (de facto) Government Lieutenant-Governor David C. Onley Premier Dalton McGuinty (Liberal) Federal representation in Canadian Parliament House seats 107 Senate seats 24 Confederation July 1, 1867 (1st) Area... This article is about the Canadian province. ... This article is about the Canadian province. ... This article is about the Canadian province. ...

Property taxes

The municipal level of government is funded largely by property taxes on residential, industrial and commercial properties. These account for about ten percent of total taxation in Canada. Property tax, millage tax is an ad valorem tax that an owner of real estate or other property pays on the value of the property being taxed. ...


Excise taxes

Both the federal and provincial governments impose excise taxes on inelastic goods such as cigarettes, gasoline, alcohol, and for vehicle air conditioners. A great bulk of the retail price of cigarettes and alcohol are excise taxes. The vehicle air conditioner tax is currently set at $100 per air conditioning unit. Canada has some of the highest rates of taxes on cigarettes and alcohol in the world. These are sometimes referred to by Canadians as "sin taxes". In economics, elasticity is the ratio of the proportional change in one variable with respect to proportional change in another variable. ... Unlit filtered cigarettes. ... Petrol redirects here. ... This article does not cite any references or sources. ... Note: in the broadest sense, air conditioning can refer to any form of heating, ventilation, and air-conditioning. ...


Payroll taxes

Ontario levies a payroll tax on employers, the "Employer Health Tax", of 1.95% of payroll. Eligible employers are exempt on the first $400,000 of payroll. This tax was designed to replace revenues lost when health insurance premiums, which were often paid by employers for their employees, were eliminated in 1989.


Quebec levies a similar tax called the "Health Services Fund". For those who are employees, the amount is paid by employers as part of payroll. For those who are not employees such as pensioners and self-employed individuals, the amount is paid by the taxpayer.


Premiums for the Employment Insurance system and the Canada Pension Plan are paid by employees and employers. Premiums for Workers' Compensation are paid by employers. These premiums account for 12% of government revenues. These premiums are not considered to be taxes because they create entitlements for employees to receive payments from the programs, unlike taxes, which are used to fund government activities. The funds collected by the Canada Pension Plan and by the Employment Insurance are in theory separated from the general fund. It should be noted that Unemployment Insurance was renamed to Employment Insurance to reflect the increased scope of the plan from its original intended purpose. Unemployment benefits are sums of money given to the unemployed by the government or a compulsory para-governmental insurance system. ... The Canada Pension Plan (CPP) is a contributory, earnings-related social insurance program. ... Workers compensation (colloquially known as workers comp in North American English or compo in Australian English) provides insurance to cover medical care and compensation for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employees right to sue their employer for the...


Employment Insurance is unlike private insurance because the individual's yearly income impacts the received benefit. Unlike private insurance, the benefits are treated as taxable earnings and if the individual had a mid to high income for the year, they could have to repay up to the full benefit received. Unemployment benefits are sums of money given to the unemployed by the government or a compulsory para-governmental insurance system. ...


Health and Prescription Insurance Tax

Ontario charges a tax on income for the health system. These amounts are collected through the income tax system, and do not determine eligiblity for public health care. The Ontario Health Premium is an additional amount charged on an individual's income tax that ranges from $300 for people with $20,000 of taxable income to $900 for high income earners. Individuals with less than $20,000 in taxable income are exempt.


Quebec also requires residents to obtain prescription insurance. When an individual does not have insurance, they must pay an income-derived premium. As these are income related, they are considered to be a tax on income under the law in Canada.


Other provinces, such as British Columbia and Alberta, charge premiums collected outside of the tax system for the provincial medicare systems. These are usually reduced or eliminated for low-income people.


Inheritance tax

Since the government of Brian Mulroney in the 1980s, Canada has had no inheritance taxes. Instead, inheritance is treated as a disposal subject to the same capital gains taxation as, for example, the sale of the asset. Martin Brian Mulroney PC CC GOQ (predominantly known as Brian Mulroney) (born March 20, 1939), was the eighteenth Prime Minister of Canada from September 17, 1984, to June 25, 1993 and was leader of the Progressive Conservative Party of Canada from 1983 to 1993. ... The examples and perspective in this article or section may not represent a worldwide view. ...


International taxation

Canadian individuals and corporations pay income taxes based on their world-wide income. They are protected against double taxation through the foreign tax credit, which allows taxpayers to deduct from their Canadian income tax otherwise payable the income tax paid in other countries. A citizen who is currently not a resident of Canada may petition the CRA to change his status so that income from outside Canada is not taxed.


International comparison (personal income tax)

Comparison of taxes paid by a household earning the country's average wage

Country Single
no kids
Married
2 kids
Country Single
no kids
Married
2 kids

Australia 28.3% 16.0% Korea 17.3% 16.2%
Austria 47.4% 35.5% Luxembourg 35.3% 12.2%
Belgium 55.4% 40.3% Mexico 18.2% 18.2%
Canada 31.6% 21.5% Netherlands 38.6% 29.1%
Czech Republic 43.8% 27.1% New Zealand 20.5% 14.5%
Denmark 41.4% 29.6% Norway 37.3% 29.6%
Finland 44.6% 38.4% Poland 43.6% 42.1%
France 50.1% 41.7% Portugal 36.2% 26.6%
Germany 51.8% 35.7% Slovak Republic 38.3% 23.2%
Greece 38.8% 39.2% Spain 39.0% 33.4%
Hungary 50.5% 39.9% Sweden 47.9% 42.4%
Iceland 29.0% 11.0% Switzerland 29.5% 18.6%
Ireland 25.7% 8.1% Turkey 42.7% 42.7%
Italy 45.4% 35.2% United Kingdom 33.5% 27.1%
Japan 27.7% 24.9% United States 29.1% 11.9%

Source: OECD, 2005 data [1]

References

See also

Wikiquote has a collection of quotations related to:

  Results from FactBites:
 
Taxation in Canada - Wikipedia, the free encyclopedia (1626 words)
The level of Taxation in Canada is about average among Organisation for Economic Co-operation and Development (OECD) countries, but it is higher than the rate in the United States, the country with which Canada usually compares itself.
Income taxes throughout Canada taxes are progressive with the wealthy paying a higher percentage than the poor.
They are protected against double taxation through the foreign tax credit, which allows taxpayers to deduct from their Canadian income tax otherwise payable the income tax paid in other countries.
Canada's Mining Taxation - International taxation (1300 words)
In particular, Canada's international tax rules are based on the principle of taxation of residents with priority to tax given to the source country.
Elimination of country double taxation: A Canadian resident is entitled to relief from double taxation in the form of a foreign tax credit or exemption from tax in respect of foreign source income.
The taxation of FAs and CFAs depends on whether the income earned is "active business income" or "passive income" and on whether Canada has a tax treaty with the country in which the FA or the CFA operates.
  More results at FactBites »


 

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