Temporary taxation? No end in sight.

Author:Peddie, Matthew

Today, direct taxation is a course of action to build federal funds that has been in place for as long as most Canadians can remember. It has evolved from what was initially a ten-page statute to what is today over 2,500 pages and far too complex for the average Canadian to fully understand. Throughout the development of the Income Tax Act and the direct taxation system in Canada, the debt, which is the reason direct taxation was implemented, has also grown. Federal debt in Canada was less than $500 million at the time that the "War Tax Upon Income" bill was implemented and has grown to be over $630 billion and climbing today. Without a doubt, there will be debt and direct taxation as long we live, although this was not the intention at the time the system was implemented.

On August 4, 1914, the United Kingdom declared war on Germany. Canada became involved overseas in the First World War as part of the British Empire. Over the next three years Canadian resources were drained in order to provide support to their allies and to troops overseas. Income tax had been temporarily implemented long before the First World War in both the U.S.A and U.K. and by the start of World War 1, these nations had permanent taxes in place to support their war efforts. At the same time, the Canadian government had no intention of resorting to direct taxation; instead Canada implemented a system of taxes levied on specific goods and services to provide government funding. On July 25, 1917 this all changed. The Minister of Finance, Sir Thomas White, made a proposal for the "War Tax Upon Income" bill to be put in place because the existing tax system was not providing a sufficient level of financial support that was required for the War. The proposal for this bill was to provide a short-term resolution for Canada to aid in the financing of the requirements needed for World War 1. No specific length of time was specified as there was no clear indication of how long the War would last. Sir Thomas White's proposal was to have the bill reviewed within one to two years after the end of the War in order to determine if it was viable and reasonable for Canada moving forward. The bill was not instituted as a permanent resolution to offset the debt of the country and, as such, the bill was named the "War Tax Upon Income" bill.

The initial bill implemented in 1917 taxed a limited portion of the Canadian population. With the end of World War 1 there was no end to direct...

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