Income taxes in Canada constitutes the majority of the annual revenues of the Government of Canada. But did you know when was the income tax officially imposed in Canada? Read on, as we unfold a brief history about income taxes in Canada.
When was Income Tax officially imposed?
Unlike countries such as United Kingdom and the United States, Income Tax in Canada was not imposed until 1917. It was actually a temporary measure in order to organize finances for World War. The legislation was named the Income War Tax Act. It was in 20th September 1917 that the Government had implemented a tax of 4% on all income of those who earned over $2000. Others had a personal exemption of up to $3000. The Canadian whole annual income was more than $6000, their tax rate ranged from 2 to 25 percents. These exemptions resulted in being high at that time, thus, only 2 to 8 percents of individuals filed for tax returns. In 1934, around 190,000 individuals paid income tax that is about 2% of the total Canadian population.
When was the Income Tax Act passed?
In 1948, the Income Tax Act was passed. This act was similar to the Income War Tax Act, but just double the size. It was by this time that 10 different tax brackets were introduced that ranged from 15% to 84%. Also around 17% of the population were paying taxes.
When was the tax act reformed?
In 1962, a major reform of the income tax legislation took place. It was at this time that the Royal Commission on Taxation was established under Kenneth Carter or also known as the Carter Commission. In 1967, the commission presented a 7-volume report recommending few fundamental changes in the tax legislation and bring in use the comprehensive tax base.
Later, another tax reformation took place in 1987, the main aim of which was to reduce the number of tax brackets, which numbered nine at the time to three. And, in 1991, the GST was introduced.
When did the tax changes take place?
Tax changes mostly took effect in 2000 this included the moving away of the provincial from the tax on the tax system. Thus, the income tax and the tax rates were fully indexed to the inflation. It was then by 2006 that around 50% of the population paid taxes.
As time is progressing, taxation is developing into a complex system that is difficult to understand.
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