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ONTARIO INCOME TAX

Prior to 1936, municipalities of the Province of Ontario were permitted to levy an income tax under the provisions of the Assessment Act. Since the enactment of the Income Tax Act of Ontario,"1 the Provincial government imposes a Provincial income tax, part of the revenue of which is allocated to the municipalities, and no municipal income tax is now levied. Corporations in general are not taxed under this act but under the Corporations Tax Act.

The term "person" as used in the act includes: "Any association, trust, personal corporation, or other body, and the heirs, executors, administrators, and curators or other legal representatives of such person, according to the law of Ontario; but does not include any body corporate except a personal corporation." The definition of a "personal" corporation is identical with that contained in the Dominion Income Tax Act,72 except that, wherever the phrase "in Canada" is used, "in Ontario" is substituted therefor.

Most of the provisions of the Ontario act have been adopted from the Dominion act, such as those relating to the definition of taxable income, exemptions and deductions, foreign tax credits, and individuals liable to income tax. Individuals resident in Ontario must include dividends in their returns, and distributions deemed to be dividends are the same as under the Dominion act. A nonresident individual who receives dividends from Ontario companies is not liable to the Provincial income tax, except where he renders services in Ontario as a director, officer, or employee of any corporation carrying on business in Ontario, the majority of the voting shares of which are owned or controlled by any such person or any combination of them or any trustee acting on his or their behalf, such dividends become taxable income.

As under the Dominion act, the personal exemptions are $1,000 for a single person, $2,000 for a married person, and $400 for each dependent child.

The rates of tax applicable to all individuals are contained in a lengthy schedule, the basis of which may be summarized as follows:

On the first $1,000 of net income or any portion thereof in excess of exemptions 1.5 percent and increasing by 0.5 percent on each $1,000 or part thereof up to $20,000 (tax $1,250); then 11.5 percent upon the amount in excess of $20,000, but not $25,000 and increasing by 0.5 percent on each $5,000 up to $100,000 (tax $13,450); 19.5 percent upon the amount in excess of $100,000 up to $110,000 and increasing by 0.5 percent on each $10,000 up to $150,000 (tax $23,700); 22 percent upon the amount in excess of $150,000 up to $175,000 and increasing by 0.5 percent on each $25,000 up to $400,000 (tax $84,325); 27 percent on the amount in excess of $400,000 up to $450,000; 27.5 percent on the amount between $450,000 and $500,000 (tax $111,575); and 28 percent upon the amount by which the income exceeds $500,000.

The sections of the Ontario act relating to returns and administration of the tax are practically identical with those contained in the Dominion act. The Legislative Assembly of Ontario, in adopting

70 Revised Statutes of Ontario, 1927, ch. 238, as amended.

Ontario Statutes, 1936, ch. 7, March 2, 1936.

72 See p. 93.

the wording of the Dominion act insofar as possible, apparently anticipated the possibility of a single return for individuals under both acts and of economies in administration. The act itself makes provision therefor in subsection 2 of section 76, stipulating that upon the approval by the Lieutenant-Governor in Council of an agreement between the Treasurer of Ontario and the Minister of National Revenue, and subject to its provisions, the Minister and the Dominion Commissioner of Income Tax are authorized to exercise, on behalf of the Treasurer and Controller of Revenue, such powers and duties imposed upon the Treasurer and Controller of Revenue under this act as may be specified in the said agreement. Then subsection 3 provides that the Lieutenant-Governor may authorize the Treasurer to pay any expenses that may be incurred by the Minister in carrying out the provisions of the act.

QUEBEC CORPORATION TAX

The Corporation Tax Act 3 of the Province of Quebec provides that every partnership, association, firm, or person doing business in Quebec, whose chief office or principal place of business is outside the Dominion of Canada, and every incorporated company (except one publishing newspapers or periodicals, and mutual insurance, toll bridge, drainage, agricultural or colonization, and butter and cheese companies) exercising any of its corporate rights, powers, or objects in the Province, shall pay annual taxes on paid-up capital, offices, and profits.

TAXES ON CAPITAL AND OFFICES

Companies are subject to a tax of one-tenth of 1 percent upon the paid-up capital employed in the Province, and an additional tax of $30 for each place of business in the cities of Montreal and Quebec, and $15 in any other municipality; provided, however, that if the amount of the paid-up capital of the company is under $25,000 the amount of the additional tax is reduced to half. Railway or navigation companies, operating one or more hotels, are required to pay the foregoing taxes, based on the amount of paid-up capital used in running the establishments.

The Lieutenant-Governor in Council may allow such reduction of taxes, for a fixed or undetermined period, as he may deem just to any incorporated company having its head office outside of the Province and doing business in Quebec; having its main office in the Province but the greater part of its assets outside; or having its head office. in the Province but doing only the business therein of holding the stock, bonds, and other securities of other incorporated companies.

INSURANCE, BANKING, LOAN, TRUST, AND EXPRESS COMPANIES

Life-insurance companies must pay a tax of 134 percent and other insurance companies 1 percent upon the gross amount of premiums, with a minimum of $400 for life-insurance companies and $250 for other insurance companies; these minimum amounts are assessable as a first payment upon every insurance company commencing to do 73 Revised Statutes of Quebec, 1925, ch. 26 as amended.

business in the Province. In the case of marine insurance a tax of $250 is levied on every person, firm, or company carrying on such business either as principal, agent, or broker. In the case of persons, firms, or companies parties to any contract of indemnity, upon the plan known as inter-assurance or reciprocal insurance, there is levied a tax of 1 percent on the net premiums paid in connection with such

contract.

Banks pay a tax of one-tenth of 1 percent of the paid-up capital, and $200 for each head office or chief place of business in Montreal and Quebec, and $150 for any other office in these cities. In other parts of the Province banks pay $30 for each office. These two forms of tax on banks are subject to a surtax of 45 percent of the amount of the taxes.

Loan companies with a fixed capital exceeding $500,000 must pay a tax of $400, with an additional sum of $50 for each million or fraction of the paid-up capital over $1,000,000; from $400,000 to $500,000, $300 tax; $300,000 to $400,000, $250 tax; $200,000 to $300,000, $200 tax; $100,000 to $200,000, $150; $100,000 or less, one-tenth of 1 percent of the amount of the capital; and without a fixed capital, $100 tax. If the fixed capital is more than $100,000, the company must pay an additional tax of $100 for each place of business in Montreal and Quebec and $50 in any other place; and if the capital is $100,000 or less and where there is no fixed capital, $50 must be paid for each office in Montreal and Quebec and $25 in any other place.

Trust companies pay one-fifth of 1 percent of the paid-up capital to $1,000,000, and $25 for each $100,000 or fraction thereof in excess of this amount; $50 for each office in Montreal and Quebec and $20 in other places. The Lieutenant-Governor in Council may reduce the taxes of a firm, having its headquarters outside of the Province, provided that the tax will not be less than $100.

Express or forwarding houses, whether companies, partnerships, or associations, foreign to the Province, pay five-tenths of 1 percent upon gross earnings in Quebec; provided that the tax shall not be less than $800; and an additional tax of $50 for each office in Montreal and Quebec, and $20 in any other part of the Province. If the firm is foreign to Canada and carries on any business other than an express and forwarding business exclusively, it must pay an additional tax of one-half of 1 percent of the gross earnings in the Province, the total remittance not to be less than $400.

Other types of companies which are subject to special taxing provisions are navigation, telegraph, telephone, railway, sleeping or parlor car, and city tramway companies.

INDIVIDUALS WHOSE CHIEF PLACE OF BUSINESS IS OUTSIDE OF CANADA

Partnerships, associations, or persons whose chief place of business is outside of Canada and which are not subject to any of the foregoing taxes must pay one-tenth of 1 percent of the gross earnings in the Province-never less than $50-and an additional tax of $30 is collected for each office in Montreal and Quebec and $15 in any other place in the Province.

TAX ON PROFITS

Each corporation, company, partnership, firm, association, and person subject to the above taxes, except banks and railway companies, is also liable to an annual tax equal to 2.5 percent of the profits earned in the Province, without deducting therefrom any charge or reserve of a similar nature, or reserve for capital account. Depreciation, however, may be deducted from such profits provided it be proper and for a reasonable amount.

DOING BUSINESS

Doing business in this Province and carrying on any undertaking, trade, or business therein when pertaining to an incorporated company is defined by the act as "exercising any of its corporate rights, powers, or objects in the Province. Nevertheless, the taking of orders, the purchase or the sale of merchandise and other effects, by means of travelers or by mail, shall not be interpreted as being the exercise of any of the corporate rights, powers, or objects of the company in the Province, if the company has no agent, representative, vendor, salesman on commission, or employee resident in the Province, or has no place of business in the Province; but, in such case, the burden of proving that it has no agent, representative, vendor, salesman on commission, or employee resident in the Province or that it has no place of business in the Province shall fall upon the company."

QUEBEC INCOME TAX (CITY OF MONTREAL)

No Provincial income tax is levied by the Province of Quebec except as provided for in the Corporation Tax Act. However, the city of Montreal levies an income tax on individuals, but not on corporations, based on the income tax payable to the Dominion Government. The amount payable to the municipality is established by applying the following percentages on the amount of tax payable by individuals under the Dominion Income War Tax Act: 10 percent of the amount payable under the act, if such amount is $200 or less; 15 percent if the amount payable is over $200, but does not exceed $400; and 20 percent if the amount payable is over $400.

ALBERTA CORPORATIONS TAX

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Banking, electric-lighting, express, gas, insurance, grain-elevator, land, loan and finance, trust, land, street-railway, telegraph and telephone companies pay special taxes under the provisions of the Corporations Taxation Act. Insurance companies engaged in the business of hail insurance pay 0.5 percent, fire insurance 2 percent, life insurance 3 percent, and every other insurance company 1 percent on the gross premiums received from business transacted in Alberta.

TAX ON CAPITAL

Companies not otherwise taxed which transact any of their ordinary business in the Province are required to pay an annual tax of 50 cents for every $1,000 of their authorized capital. The tax pay

Revised Statutes of Alberta, 1922, ch. 29, as amended.

able after January 1, 1938, in no case may be less than $15, but there is a proviso that the Minister may in any year, upon being satisfied that the volume of the business of a foreign company transacted within the Province during the previous year does not exceed in value or amount the sum of $1,000, issue a certificate to that effect, and thereupon the tax on capital does not apply to that company during the year in which the certificate is so issued.

Where a company has its head office outside of the Province and transacts business in the Province, the Lieutenant-Governor in Council may allow such reduction of the tax upon such company as may be deemed just, having regard to the extent, nature, and importance of its operations in the Province, provided that the tax payable by any one such company shall not be less than $25.

ALBERTA INCOME TAX

Under the Alberta Income Tax Act 75 a resident taxpayer is subject to tax on income from all sources, and nonresidents on income earned within the Province. A taxpayer is entitled to deduct from the tax that would otherwise be payable by him under the Alberta act such amount paid to any other Province of Canada or to Great Britain or any of its self-governing Dominions, colonies, or dependencies other than the Dominion of Canada for income derived therein where a similar credit is allowed to persons in receipt of income from Alberta; the credit, however, may not exceed the amount that would otherwise be pavable under the Alberta act. Under an amendment of October 5, 1937, persons who come into the Province and earn money, and who are not residents, must pay income tax at the rate of 2 percent on the gross sales or receipts within the Province.

The personal exemptions are as follows: Married person, $1,500; for each dependent $400; and an unmarried person, $750.

The rates of tax applicable to persons other than corporations and joint stock companies are levied on the following basis: On the first $1,000 or any portion thereof, 2 percent.

3

On the amount in excess of $1,000 but not in excess of $2,000, percent; then increasing by 1 percent on each successive $1,000 up to 16 percent on the amount between $14,000 and $15,000.

On the amount in excess of $15,000 but not in excess of $16,000, 18 percent; then increasing by i percent on each successive $1,000 up to 28 percent on the amount between $24,000 and $25,000; and on the amount in excess of $25,000, 30 percent.

In the case of a single person with no dependents, and an income of $1,200 or more, the above schedule of rates is increased in each case by 1 percent.

A 1938 amendment provides that corporations shall pay a tax of 3 percent on the first $2,000, and an additional 1 percent on each successive $1,000 or part thereof up to 7 percent on the amount in excess of $5,000 but not in excess of $6,000; then 9 percent on the amount between $6,000 and $7,000 and an additional 1 percent on each $1,000 thereafter up to 12 percent on the amount between $9,000 and $10,000. Where the net income of a company exceeds $10,000, a flat rate of 7 percent is levied on the entire income. These

Statutes of Alberta, 1932, ch. 5, as amended.