Last updated: September 19 2017
National income tax is such a given in western economies that we lump it in with death as being unavoidable and portray the “Taxman” as some kind of grim reaper. But, in reality, federal income tax is a fairly recent invention — in Canada, we’ve just now reached the 100-year anniversary of the practice.
Ironically, it was only supposed to be a temporary measure to help finance World War I.
The provinces were already taxing income directly at that time, but federal efforts to raise funds through postal rates, customs and excise duties and other various means were simply not enough to feed the engine of war. On September 20, 1917, the Income War Tax Act, 1917 received Royal Assent and, in one form or another, has been with us ever since.
Since it was meant as a temporary measure, it was to be reviewed a year or two after the end of the war to assess whether it was still necessary and suitable. Sir Thomas White, Minister of Finance in Sir Robert Borden’s Conservative government at the time, expressed concerns that the cost of administration alone would be too high, that the tax not be significantly higher than the income tax already imposed in the U.S. and that substantial taxes on income would run counter to Canada’s policy of encouraging immigration.
If you think some of today’s rules are restrictive, you’ll be glad that the appeals process of 1917 is a thing of the past.
Taxes were due within one month of the mailing date of the notice of assessment and any objection had to be made in writing within 20 days after that date. Taxpayers could further appeal unsatisfactory decisions to the Exchequer Court if they expressed their intention to do so within 20 days of the ruling and provided security of $400 (nearly $7,000 in today’s dollars), and the decision of that body was final and conclusive.
Still firmly in place after World War II, Canada’s income tax system was overhauled significantly in 1946, following a report by a special committee of the Senate appointed to examine it. The Income Tax Appeal Board was created to make the appeals process more convenient and less costly, allowing taxpayers more generous timelines and removing the financial burden of having to post security.
In 1948, a new Income Tax Act came into effect, making sweeping changes to tax legislation in Canada. Clearly income tax was here to stay.
Here are a few other significant dates:
Today, the Court has 22 judges and two modes of procedure — general procedure, and an informal procedure that can be used as long as:
Happy 100th anniversary, income tax! You’ve come a long way for what was supposed to be a temporary war-time measure!
For more information on the 100-year history of income tax in Canada, click here.
Want to master the tax return and all its nuances? Check out Knowledge Bureau’s new Lite Course: Introduction to Personal Tax Preparation.
Or, to celebrate income tax’s 100th — and Canada’s sesquicentennial — come to the Distinguished Advisor Conference, where the theme is Canada 150: Financial Advice at the Crossroads of Change.
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