Benjamin Franklin said it first: “… in this world nothing is certain except death and taxes.”
Personal income tax returns were due on April 30.
If you don’t file your taxes by the due date, CRA will charge a penalty of 5% and an additional 1% for every month until you file your tax return.
But it wasn’t always like this in Canada.
Income tax was first introduced in 1917 when Canada was struggling with mounting debt due to wartime spending. Canada did more than its fair share during The Great War. When Canada had exhausted its borrowing power with Great Britain and the United States, the nation looked inward for financing. The Wartime Tax Act was passed by the Borden government as a temporary measure. Income tax was levied mainly on businesses profiting from the war.
It was not until 1949 that the Income Tax Act as we know it today (in modified form) came into effect. During the post-war years about 4% of Canadians paid income tax; today 80% are paying income tax.
Before 1917, the federal government’s major sources of revenue were import and export taxes. The first recorded taxes levied in Canada were in 1650 by Louis XIV. the King of France. He charged a 50% export tax on beaver pelts and a 10% tax on moose hides!
According to the Canadian Encyclopedia, the Canadian tax structure changed profoundly during the Second World War. By 1946 direct taxes accounted for more than 56% of federal revenue.
Personal and corporate income taxes accounted for 72% of the total tax revenue for the federal government in 2022.
It’s clear that after more than a century, the temporary measure of income tax isn’t going away!
As it was in 1917, when income tax was introduced, Canada is involved in wartime spending through NATO and other alliances. As it was in 1917, Canada is deeply in debt. It’s no wonder that the recent federal budget has introduced new taxes.
Some think Canada’s tax rate is too high. However, Canada had a tax-to-GDP ratio of 33.2% in 2022 compared with the OECD average 34%. In 2021 Canada was ranked 23rd out of the 38 OECD countries in terms of tax-to-GDP ratio.
Although I struggle every year to complete the income tax forms, I am grateful that I have enough income that I an required to pay taxes. Those taxes pay for the services that I need. Taxes provide me with a lifestyle that is enviable around the world. Canada consistently ranks as one of the best places to live.
I’m not a financial expert and I’m sure you will have arguments with some of the statements in this column. I can only tell you that because of taxation Canadians live longer and more fulfilled lives. Death comes for us all, and taxes are just as certain, but for Canadians taxation makes life better.
