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In September 20, 1917, the Canada Income Tax Act. (ITA) was born declaring: 2 (1) An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year. This tax was required as a necessity to finance the addition of 100,000 men to the Canadian armed forces participating in the First World War.  Once the revenue started coming in and the war ended, in 1918 it was likely so nice to have all that tax-money which was being put to use to improve infrastructure, like roads, sanitation, bridges, etc.  As the money was building the country at a faster pace, so increased the need for more money, to ensure that funds were being directed to certain causes.

In Canada our tax system is a progressive system, which means “the more you earn, the more you pay.” The lawmakers who are responsible for the laws of the country and for the legislation behind the Income Tax Act and the Excise Tax Act, are the Department of Justice. The Income Tax Act contains the laws regarding taxation in Canada and The CRA enforces the Income Tax Act (and Excise Tax Act) in Canada.

For 2019, every Canadian taxpayer can earn taxable income of $12,069 ($11,809 in 2018) before paying any federal tax.

The basic personal tax credit is calculated by multiplying the tax rate for the lowest tax bracket by the basic personal amount.  The 2019 tax credit is 15% x $12,069 = $1,810 (15% x $11,809 = $1,771 in 2018).

Provincial or territorial income taxes are paid in addition to the federal taxes, based on where the taxpayer resides on December 31 of the tax year.  All provinces and territories except Quebec use the taxable income amount calculated for federal tax purposes, and then apply their own income tax rates.

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