“PAY AS YOU EARN”

Waikato Times, Volume 132, Issue 21982, 10 March 1943, Page 4

“PAY AS YOU EARN”

new basis for income tax CANADA’S BUDGET PROVISION The most important feature of the Canadian Budget is the transformation oi personal income tax to the pay-as-you-earn basis, says a cablegram received by the Canadian High Commissioner in Wellington. Under this plan, Mr Ilsley, Minister of Finance, explained, when a man’s income falls his tax falls off with it. When his income rises his tax rises with it. It ax’oids 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 cf this year’s income. These instalments will be based upon estimated income and tax for this year with safeguards tc be provided against under-estimates. In both cases the correct amount of income will be determined at the end of tne 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. Overlapping Avoided “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 liabiltiy 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 Ihe taxpayer. Investment income: of not more than 3000 dollars will ! be treated in the same way as earned , income.” The new plan, however, will require that the higher rate 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 proposition 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 oi the pay-as-you-earn plan,” Mr Ilsley proceeded, “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 re-arrangement 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 next fiscal year 1943-44 will be an increase of about 105,000,000 dollars in our receipts from personal income taxes of which roughly 15,000,000 dollars will be refundable after the war.”