There are several Canadian events celebrating their 100th year anniversary this year, and we are reminded of two of them regularly on television. First there is the battle at Vimy deemed as Canada’s coming of age event when we earned international respect as a nation. Then there’s hockey. It has been 100 years since the formation of Hockey Canada which was the beginning of our national obsession with the game.
In 1917 there was another, less celebrated Canadian first: the introduction of personal income tax. You won’t see any promotion of that event. Introduced as a temporary measure to help finance Canadian expenditures for WWI, it formed part of the Income War Tax Act, and using a few thousand words it implemented a 4% on all income of single men over $2,000 and over $3,000 for others. Because of these relatively high exemption levels, fewer than ten percent of individuals had to file tax returns that year, and total tax revenue at that time represented just 3% of total federal revenue. Fast forward 100 years: the Income Tax Act requires more than one million words of explanation, and the number of lines on the federal income tax form (T1) has risen from 23 to 328. Personal Income Tax now accounts for roughly 47% of Federal tax revenue.
Filing a tax return has become a complicated business, and is costing us more than just our tax payments. The tax code has become so complicated because governments use it as a tool to influence our behaviour. Take transit- get a credit! Sign your kids up for soccer- get a credit! Simplifying personal income tax compliance would show Canadians that our government respects our ability to make our own decisions and might make us a little less grouchy each year on April 30th. KG