Beyond Beavers: Tax in Canada Tale from Louis XIV to HST

Explore the intriguing journey of taxation in Canada, from its humble beginnings in the 17th century to the contemporary tax landscape. Delve into the historical milestones that shaped Canada’s tax system, offering a unique perspective on the evolution of financial policies over the centuries.

1650: The first recorded tax in Canada.

Louis XIV of France introduced the inaugural tax in Canadian history. This levy included a 50 percent export tax on all beaver pelts and a 10 percent tax on elk pelts imposed on the residents of New France. Preceding 1650, colonial administrations gathered taxes, primarily through customs duties, and remitted the proceeds to their respective mother countries, England and France.

1867: Collecting and Spending.

In 1867, a pivotal moment in Canadian taxation occurred with the passage of the British North America Act. This legislation empowered the Canadian government to generate revenue through taxation. Over the subsequent five decades, the federal government primarily relied on taxes like customs duties and excise taxes to meet its financial needs.

In terms of expenditures, the Fathers of Confederation strategically allocated governmental responsibilities between the federal and provincial entities. The more costly domains of responsibility, including the construction of railways, roads, bridges, and harbors, fell under the purview of the federal government. Concurrently, provincial governments assumed responsibility for sectors such as education, health, and welfare.

1914: Taxation for World War I Financing.

With Britain declaring war on Germany, Canada, as a British colony, aligns itself with Britain in the Great War. The financial strains of supporting World War I prompt an escalation in customs and excise taxes, ushering in significant transformations in the Canadian tax landscape.

1916: Introduction of Corporation Tax.

The passage of the Business Profits War Tax Act marks the inception of corporation tax collection by the federal government. While this temporary business profits war tax differs from the contemporary income tax structure, it lays the groundwork for the federal taxation of income.

1917: Inauguration of the First Federal Income Tax.

In response to the escalating financial demands of the war, Sir Robert L. Borden’s federal government introduces the Income War Tax Act, encompassing both personal and corporate income. Minister of Finance Sir Thomas White asserts, “I have placed no time limit upon this measure…a year or two after the war is over, the measure should be reviewed.” This marks the inception of Canada’s first federal income tax in 1917, a pivotal step in financing the nation’s involvement in World War I.

1920: Sales tax.

Although the war is over, the federal government introduces a sales tax to help pay for war-related expenses such as veterans’ pensions and debt interest. In 1924, the federal sales tax replaced this temporary tax.

1948: Income Tax Act.

After 30 years, the government no longer considers federal income tax temporary and replaces the Income War Tax Act with the Income Tax Act.

1991: GST.

The federal government replaces the federal sales tax with the goods and services tax (GST). The Goods and Services Tax (GST) was introduced in Canada on January 1, 1991, by the government of Prime Minister Brian Mulroney. It was a federal value-added tax. The introduction of the GST was met with public opposition. Thereafter, it led to political changes and the eventual replacement of the tax.

1999: The Canada Revenue Agency was officially established.

The CRA was formed through the merger of the tax functions of the Canada Customs and Revenue Agency (CCRA) and the Department of Finance Canada. This merger aimed to streamline and improve the efficiency of tax administration in our country.

The CRA stands as the largest entity within the Canadian federal public service, boasting a personnel count of 54,933 individuals as of 2022. On average, a CRA employee is 44 years old and has accumulated 11 years of service. Their operations extend across 57 tax service offices nationwide. Notably, technology spending and the ratio of total revenue collected to total operating expenditures fall below the average observed in comparable countries.

2010: Harmonized Sales Tax (HST) Implementation.

Several provinces in Canada have combined their provincial sales tax with the federal Goods and Services Tax. Thus, they created a Harmonized Sales Tax (HST). This streamlines the taxation process and reduces administrative burdens. However, the introduction of HST has been met with mixed reactions in different provinces.

2009: Tax-Free Savings Account (TFSA).

In 2009, Canada introduced the Tax-Free Savings Account (TFSA), a savings vehicle that allows individuals to earn investment income tax-free. It has become a popular tool for Canadians to save and invest.

2013: The Penny Phase-Out.

In 2013, our country phased out the penny from its currency. To reduce production costs the government eliminated the penny. As a result, this change affected how businesses rounded taxes when customers paid with cash.

From beaver pelts in the 17th century to the Tax-Free Savings Account in the 21st century.

Canada’s tax journey is a fascinating narrative of adaptation and innovation. These fun facts unveil the resilience of Canada’s tax system. In fact, it is reflecting its responsiveness to historical events and the changing needs of its citizens.

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