The Many Ways to Evaluate Income Taxes: Canadian Income Tax Compliance with Attention to Surplus Stripping: 1917-1972

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Authors
Scarlett, Diane
Keyword
Income tax , Tax avoidance , Surplus stripping , Dividend stripping , Tax compliance , Asset stripping , Tax evasion
Abstract
This study of the relationship between the Canadian taxpayer and the income tax regime examines the manner in which the federal income tax, first established by Finance Minister Sir Thomas White of the Robert Borden Conservative government in 1917, evolved into a complex and onerous obligation. Its central narrative is a longer history of the mechanics of tax compliance and its evolution. This evolution altered the ramifications of tax compliance creating particular tensions around the taxation of retained corporate earnings and dividend income. Using newspaper articles, chiefly from The Globe and Mail, and the reported cases available on income tax compliance between 1917 and 1931 and the reported cases on surplus stripping between 1942 and 1972, the mechanics and tensions of the administrative tax relationship will be examined. It is proposed that these tensions and taxpayers’ resulting choices should be considered in a framework that does not overly favour the matrix and rhetoric influenced by John Stuart Mill’s equality of sacrifice principles, but that considers Adam Smith’s tenants of taxation, namely a consideration of the presentation and value of tax neutrality, simplicity and certainty.
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