Canadian Payroll Reporter

3 Canadian HR Reporter, a Thomson Reuters business 2017 Marking a century of federal income tax e roots for Canada's current income tax system go back to First World War BY SHEILA BRAWN WHILE CANADIANS will cel- ebrate Canada's 150 th birthday this year, there is another mile- stone happening in 2017 over which some people may not re- joice. Federal income tax turns 100 this year. Income tax deductions are such an integral part of em- ployer source deductions and remittances today that it is hard to imagine a time when they did not exist. However, up until 1917, Canadians did not pay fed- eral income tax. Provincial and municipal in- come taxes existed in some ju- risdictions, but today's system of paying and reporting income taxes to the federal government was not in place then. The catalyst for federal income tax was the First World War. According to Library and Ar- chives Canada, the war "placed an unprecedented drain upon the financial resources of the Domin- ion of Canada." Besides rationing food and everyday items, Prime Minister Robert Borden's government is- sued war bonds, increased tariffs on imports, and implemented a number of new taxes to help pay for war costs. Initially, the government lim- ited the new taxes to goods and services (tobacco, alcohol, tick- ets, etc). By 1916, it had added a tax on business profits, but House of Commons records from the time show that Bor- den's government was not keen on implementing an income tax. There were concerns that in- come tax would be costly to ad- minister because Canada was a large and sparsely populated country, that it could discourage immigration, and that it would impose a new tax on Canadians who had already been generous in donating money to war funds. In the government's April 1917 budget, presented only three months before the income tax bill was tabled, Finance Minister Thomas White ruled out income tax for the immediate future. He said the tax would not raise enough revenue because many Canadians had seen their income decline during the war. In addi- tion, he said a federal income tax would be a burden for those who were already paying provincial and municipal income taxes. "If such a tax is to be imposed, it seems to me that so far as the great majority of Canadians are concerned, it might better be levied in (a) time of peace, when the cost of living is again normal," he said. "On the whole, it would appear to me that the income tax should not be resorted to by the Dominion Government until its necessity becomes clearly and unmistakably apparent." By July, however, White re- versed his stance and tabled legislation that would bring fed- eral income tax to Canadians. White told the House of Com- mons that even though he still had concerns about implement- ing income tax, the government needed the additional revenue to help fight and win the war. "No matter what the cost may be in man-power or in treasure, I believe it to be the will of the peo- ple of this country that we should persevere unto the end," he said in a speech tabling the bill. "I am confident, Mr. Chair- man, that the people of Canada whose patriotism during this war has been so often and so nobly proven will in the light of present conditions, which call for it, cheerfully accept the bur- den and the sacrifice of this ad- ditional taxation," said White. There was not a lot of opposi- tion to the principle of income tax in the House of Commons at the time. The Liberal Party had been calling on the Conserva- tive government to implement an income tax for some time to help raise revenues in a more eq- uitable way. When White dismissed the notion of an income tax in the 1917 budget, Liberal Member of Parliament Michael Clark said, "But, however, the hon. Min- ister thinks about it, either he or some successor of his will be compelled within the next half generation to get vastly more of the federal revenues from the wealthy men of the country than he has done by tariff legislation in the past." Another Liberal member, Frank Broadstreet Carvell, told the House of Commons, "I know News CPR | February 2017 see CITIZENS page 8 Credit: Michel Loiselle/Shutterstock Parliament Hill's West Block includes a statue of PM Robert Borden, who introduced federal income tax in 1917.

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