CANADIAN FINANCES

Wanganui Chronicle, Volume 87, Issue 64, 18 March 1943, Page 2

CANADIAN FINANCES

“WORK AND SAVE” BUDGET Ottawa, March 3. In the Canadian House of Commons last night the Minister of Finance, the Hon. J. I. Ilsley, presented Canada’s fifth wartime Budget. Under the watchwords “Work and Save” it made provision for expenditure on a scale exceeding all previous standards. It called on every Canadian to play his part “unswervingly, skilfully and relentlessly,” it transformed personal income tax to a basis of pay-as-you-earn, while increasing the yield by an estimated 105,000,000d01. It proposed increased excise duties on spirits, increased excise taxes on cigarettes, cigars, manufactured' tobacco, raw leaf tobacco, cigarette papers, and taxes on night clubs and cabarets, and a higher postal rate on letters. Including the thousand million dollars under the Mutual Aid Bill, Mr. Ilsley had to budget against a total estimated expenditure during the coming fiscal year of 5.500.000,000 dol.

On the basis of existing taxation, revenue is estimated at 2,601,000,000 dol. Adding 151.000,000d01. increase in revenue from the budget proposals, the estimated revenue, including refundable tax, totals 2,752.000,000d01. With an expenditure of 5,500,000.000 dol. there remains a budgetary deficit of 2,748,000,000d01. to be covered by borrowing. The most important feature of the Budget was the transformation of personal income tax to the pay-as-you-earn basis. Under this plan. Mr. Ilsley exnlained, when a man’s income falls his tax falls off with it. When his income rises his tax rises with it. It avoids the lag in the payment of the tax under the present system. Under this new plan all deductions of tax made at the source during 1943 will apply in respect of tax on 1943 incomes. Those who pay in quarterly instalments will pay such instalments' in March, June. September and December of this year in respect of this year’s income. These instalments will be based upon estimated income and tax for this year with safeguards to be provided against under-estimates. In both cases the, correct amount of income will be determined at the end of the year in a final return to be filed on or before March 31, 1944, with any amount required to make up the difference between total deductions or instalment payments and actual tax. If a taxpayer finds he paid too much, or had too much deducted, he can claim a refund.

“To put tax payments on a full pay-as-you-earn basis and avoid unreasonable overlapping of two years taxes,” Mr. Ilsley added, “the Government has decided to propose that only half of the full tax liability in respect of 1942 income shall now be payable. Tax liability shall be reduced by one half in the case of earned incomes. For investment incomes, half of the 1942 liability shall be deferred until the death of the taxpayer. Investment income of not more than 3000dol. will be treated in the same way as earned income.” The new plan, however, will require that the higher rates of tax deductions which should have gone into effect next September will be made effective as soon as possible. They therefore go into effect for the first pay-roll period commencing after March 31. Those whose 1942 incomes consisted of salaries and wages, Mr. Ilsley added, had already paid a substantial part of their total tax by the end of the year. This proportion varied from about 33 per cent, in the case of fairly high incomes to 100 per cent, in the case of some lower incomes.

“Adoption of the pay-as-you-earn plan,” Mr. Ilsley proceded, “together with other changes associated with it will increase our revenues in the next fiscal year and in subsequent years. It may seem strange at first sight that a rearrangement which involves cancelling some tax liabilities and makes no increase in tax rates could somehow increase our tax revenues. The reason is that we replace the cancelled liabilities by bringing forward the taxes to be paid in all future years, including the higher deductions already enacted for September next. The effects of these changes upon revenue in the new fiscal year 1943-44 will be an increase of about 105,000,000d01. in our receipts from personal income taxes, of which roughly fifteen millions will be refundable after the war.”

Canadian officers serving in the Western Hemisphere outside of Canada are made liable to one-half of the income tax rate in respect of their remuneration, excluding subsistence allowance. Until now they have been exempt. Members of the Forces receiving pay in excess of 1600dol. a year will be liable for tax whether commissioned officers or warrant officers unless they are exempt because serving abroad, or because their duties normally are performed in aircraft or afloat. They will, however, receive a credit towards their tax equal to the tax payable on an income of 1600dol. for single persons, or on 1600dol. plus the appropriate dependants allowance for those with dependants. The tax credit will, however, be limited to those within the pay-range of 1600dol. to 3200d01. Further, it is proposed that an officer returhing to Canada after serving bn the strength of a unit overseas shall be exempt from tax for six months, or for a period equal to the time he served overseas if less than six months.

In further proposals the Budget encourages the production of oil and stimulates the search for new base metal and strategic mineral deposits. It proposes to levy additional excise duty of 2dol. a gallon on spirits with a corresponding increase in the duty on imported spirits. It guarantees to any province the revenue it received from all alcoholic beverages during the 12 months ending June, 1942, providing it is willing to increase retail prices of the spirits it sells by an amoun: at least sufficient to absorb the extra levy of 2dol. a proof gallon and an additional amount equivalent to 2dol. a proof gallon for the benefit of the province itself.

“Having in mind particularly the vital concern of this country ? h access to selling and buying markets of the world,” Mr. Ilsley said further, “the Government is prepared to discuss with the Government of the United States, the Government of the United Kingdom, or the government of any other country with which we trade, reciprocal trade arrangements wider in scope and longer in duration* than have previously been made, provided always that the advantages of such arrangements shall be open to other countries willing to adhere to the same terms.

“We believe that questions of postwar commercial policy must be tackled broadly and boldly. We believe that wo”ld trade must have a more liberal and dependable charter than it has had in the past two decades, and that countries such as Canada, for which world trade is the very blood stream, should be prepared not merely to accept desirable arrangements cut. to take the initiative in working out a plan mutually of benefit to ourselves and to other countries “We believe that countries which have had long experience of friendly relations should associate with that Initiative and furnish to others examples of concrete accomplishment in the distribution of the world’s products for the mutual welfare of all peoples.”