Still taxing after 100 years
One hundred years ago, on July 25, 1917, Conservative
Finance Minister Sir Thomas White introduced a plan for Canada’s very first income tax in the House of Commons. It was three years into the First World War, and days after the adoption of compulsory military service. White had suggested that Parliament consider whether or not to keep the tax after the war. Since we’re all still paying, someone, somewhere in Ottawa must deem this anniversary worth celebrating. The following are selected excerpts from White’s addresses to the House.
Mr. Chairman, the enactment of the Military Service Bill, which has just passed through the House, will result in material increase in and acceleration of the war expenditures of the Dominion. By that Bill, provision is made for calling an additional 100,000 men to the forces of Canada (by conscription). In view of the expenditure involved, and in order to maintain the credit of the Dominion, it is necessary that we should adopt further taxation measures. Apart from this necessity from a financial standpoint, there has arisen, in connection with the Military Service Bill, both in this House and in the country, a very natural and, in my view a very just, sentiment that those who are in the enjoyment of substantial incomes should substantially and directly contribute to the growing war expenditures of the Dominion.
In view of these considerations, I desire today to lay before this committee proposals for a national measure of income taxation. I may say that the adoption of such a measure is a distinct innovation in federal fiscal legislation. Hitherto we have relied upon duties of customs and of excise, postal rates and other miscellaneous sources of revenue. It is true that since the outbreak of the war we have adopted the Business Profits War Tax Act, which is a measure of direct taxation akin to income taxation, but not so wide in its scope. As the members of the committee are aware, the Dominion Government, under the provisions of the British North America Act, is empowered to raise revenue by any mode or form of taxation, whether direct or indirect. On the contrary, the provinces, and, by consequence, the municipalities which derive their taxation powers from the provinces, are confined, in the raising of their revenues, to measures of direct taxation. For this reason, since the outbreak of the war, I have hesitated to bring down a measure of federal income taxation … I have not regarded it as expedient, except in case of manifest public necessity, such as I believe exists at the present time, that the Dominion should invade the field to which the provinces are solely confined for the raising of their revenue…
Canada is not a country of concentrated wealth. We have a sparse population of some 8,000,000 people, scattered over an immense territory as large in area as the United States of America, almost as large as the continent of Europe. The result of that is that the cost of administration of an income tax measure will be quite substantial, and the cost of administration is always a factor which should be had in mind in connection with the imposition of taxation. Generally speaking, if the cost of administration of a tax is disproportionately heavy, it is not a good tax…
I have placed no time l i mit upon this taxation measure; but I do suggest, and I should like this suggestion to be on Hansard, that after the war is over this taxation measure should be deliberately reviewed. What I have in mind is this: In the period after this war, as in the past, we will continue to invite people to come to this country. We shall need men of enterprise, men of ability, to bring in capital and develop our immense undeveloped resources. In reviewing this measure after the war, I think consideration should be given to the question whether the taxation is so heavy that it would operate to prevent men of that type from coming to this country and giving us the benefit of their enterprise and their capital and their ability...
We cannot see very far ahead in these days. We do not know how long this war will last. We do not know what the attitude of the people of this world or of this country will be upon many questions, social, industrial, financial and fiscal. Therefore I have placed no time limit upon this measure, but merely have placed upon Hansard the suggestion that, a year or two after the war is over, the measure should be deliberately reviewed by the Minister of Finance and the Government of the day, with the view of judging whether it is suitable to the conditions which then prevail.