Canadian Payroll Reporter

News Published 12 times a year by Thomson Reuters Canada Ltd. Subscription rate: $179 per year Customer Service Tel: (416) 609-3800 (Toronto) (800) 387-5164 (outside Toronto) Fax: (416) 298-5106 E-mail: customersupport.legaltaxcanada @tr.com Website: www.carswell.com One Corporate Plaza 2075 Kennedy Road Toronto, Ontario, Canada M1T 3V4 Director, Media Solutions, Canada Karen Lorimer Publisher/Editor-in-Chief Todd Humber Editor Sheila Brawn sbrawn@rogers.com Editor/Supervisor Sarah Dobson News Editor Marcel Vander Wier Marketing Manager Robert Symes rob.symes@thomsonreuters.com (416) 649-9551 Circulation Co-ordinator Keith Fulford keith.fulford@thomsonreuters.com (416) 649-9585 Payroll Reporter Can R Can R adian adian a www.payroll-reporter.com ©2017 Thomson Reuters Canada Ltd ISBN/ISSN: 978-0-7798-2810-4 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, photocopying, recording or otherwise without the written permission of the publisher (Thomson Reuters, Media Solutions, Canada). Return Mail Registration # 1522825 | Return Postage Guaranteed Paid News Revenue Toronto Canadian Payroll Reporter is part of the Canadian HR Reporter group of publications: • Canadian HR Reporter — www.hrreporter.com • Canadian Occupational Safety magazine — www.cos-mag.com • Canadian Payroll Reporter — www.payroll-reporter.com • Canadian Employment Law Today — www.employmentlawtoday.com • Canadian Labour Reporter — www.labour-reporter.com See carswell.com for information February 2017 | CPR Citizens, newspapers supported implementation of nothing as fair and just upon everybody as an income tax." There was even support for the tax among the public and in some newspapers. "The Government's income tax proposals were keenly dis- cussed everywhere in business circles to-day," The Toronto Daily Star reported in its July 26, 1917 evening edition. "There was general satisfaction that the principle of an income tax had been adopted." An article in The Globe news- paper stated, "The Government proposals, though they can hardly be called a real 'conscrip- tion of wealth,' are a long step in advance towards equalizing the financial burden and sacrifices of the war." The article noted that in ta- bling the income tax bill, White was "bowing to the insistent pub- lic demand that those who don't fight should be made to pay." A chief concern with the in- come tax bill, both in the House and in the newspapers, was that the tax rates proposed for wealthy Canadians were not high enough. Critics also com- plained that a tax charged to those who made profits from the war would go down rather than increase with the new income tax law and that there was not a big enough difference in the amount of tax that married men would pay compared to unmar- ried men. After amendments were made to address some of the concerns, Parliament passed the Income War Tax Act and it became law on Sept. 20, 1917. The new tax applied as of the 1917 tax year. The act levied a four per cent income tax on Canadian resi- dents with annual incomes ex- ceeding $1,500 for unmarried men and widows or widowers without dependent children. For everyone else, the tax applied on annual incomes in excess of $3,000. Income included wages, salary and other amounts, such as stock profits. In addition, the act levied a "super-tax," on annual incomes exceeding $6,000. The rate ranged from two per cent to 25 per cent, depending on an indi- vidual's income bracket: $6,000.01 - $10,000.00 2 per cent $10,000.01 - $20,000.00 5 per cent $20,000.01 - $30,000.00 8 per cent $30,000.01 - $50,000.00 10 per cent $50,000.01 - $100,000.00 15 per cent $100,000.01 and up 25 per cent The legislation exempted from income tax military and naval pay paid to Canadians who had been in active service overseas in the military or navy during the war for Great Britain or one of its allies. The act also instituted a four per cent income tax on corporations with annual income exceeding $3,000. Employers had to deduct the four per cent income tax from employees and remit it to the federal government. They also had to send a "separate and dis- tinct return" showing employ- ees' incomes and their names and addresses. By Feb. 28 each year, employ- ers had to send a return to the finance minister listing every- one they employed who re- ceived a salary or other taxable remuneration. Corporations, associations and syndicates had to report all dividends and bonuses paid to shareholders and members. Individuals also had to file a tax return by Feb. 28, showing their total income for the previ- ous calendar year and providing an address in Canada to which the government could send no- tices and other documents. The act required the govern- ment to let taxpayers know the final amount of income tax ow- ing by Apr. 13 (regulations under the act could set another date). Individuals had one month to pay any income tax owing. Late payments were subject to inter- est charges of seven per cent. The penalty for not filing an income tax return was steep for both employers and individuals. The act gave the government the authority to levy a penalty of $100 for each day late. The maximum penalty for false state- ments on income tax returns was $10,000, six months in jail or both. Although White did not spec- ify how long the Income War Tax Act would remain in effect, he suggested that the govern- ment should review the need for the tax within one or two years of the war ending. While White may have viewed the tax as a temporary measure to help the country through the war, other politicians of the time recognized that it would likely become a permanent revenue tool for government. "It will never be abolished, because the good sense of the people of Canada will see that it is kept in effect for all time," Carvell said during debate of the income tax bill. Another Liberal Member of Parliament, Rodolphe Lemieux, told the House that although he wanted the tax to be a temporary measure, he thought it would likely become permanent. "I really believe that the in- come tax has today entered into the politico-economic system of Canada, to stay there for many generations," Lemieux said. And, 100 years later, employ- ers and employees are still remit- ting income tax payments and filing annual tax returns. Note: This is one in a series of ar- ticles this year that will look at significant events in the history of Canada's income tax system. from INCOME TAX on page 3 "It will never be abolished because the good sense of the people of Canada will see that it is kept in effect for all time."

• Cover