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Before the World War One, the main source of the revenue of the federal government was tariffs collected on imported products. However, as war started on, it became understandable that new sources of funds were significant. The Canadian government issued bonds such as Victory Bonds, which generated nearly $2 billion from patriotic Canadian population during the years of war. After that, the Government imposed taxes on different items including patent medicines, tobacco, transport tickets, and alcohol.
The Business Profits War Tax Act, created in 1916 required all corporations of Canada with $50,000 or more in capital to make a yearly tax return. In 1917, that Act provoked the creation of a ‘temporary’ tax on personal and corporate incomes. So, after the World War One, Canada was paying $164 million per year in interest on the debt that was created during the war, and also $76 million per annum in pensions to soldiers. That sum was more than the whole federal budget before the war. After that, the income tax became a usual feature of the Canadian economy.
When the World War One ended in November 1918, the demand for Canadian services and goods heightened. Although auto plants were prospering, the other factories and plants in chemical and steel industry were shutting down, creating unemployment. Canada needed 10 years for manufacturing output to recover to wartime levels.
After the war, some returning soldiers returned back to the farm. The rest found jobs in the services sector which had surpassed agriculture as the largest employer of Canadians just as war was breaking out. The economy of Canada underwent significant changes during World War One, but when peacetime returned, Despite the introduction of income tax and the rise of the services sector, it came more or less back to business as usual.
After the world war one, there were the general protests against the high tariffs and interest rates, against the rising cost of living have caused a major social crisis. Farmers’ organizations demanded the transfer of natural resources and utilities to public ownership, taxes on income of individuals and corporations, the sharp reduction of tariffs and electoral reform. Labor unions with increased syndicalist mood carried out mass strikes.
The King’s Government has made a significant reduction in duties and tariffs, abolished the tax on profits, and declined some income tax and sales tax. The government assisted in equipping the Maritime Provinces of port and shipping, the introduction of protectionist measures to protect the coal industry in Nova Scotia. At the same time, the government crushed the strike of workers of coal and steel industry of Nova Scotia, who protested against wage cuts.
Despite the continuing economic stagnation until 1929 in the Maritime Provinces, in general, the year of 1920 was a period of economic prosperity. The mass production of cars began, railways and roads were built, and grain exports grew. Farmers joined forces and formed their own organization for the storage and marketing of grain – wheat pools. In the province of Alberta in 1921-1935 the Government was ruled by the United Farmers (Buckley).
In English Canada, there was a rise of Protestant fundamentalism, accompanied by strict compliance with the requirements of the Sunday and the ban on trade in alcoholic beverages. However, governments in the provinces were unable to prevent massive smuggling of alcohol; and in the mid 1920’s, most provinces abolished the prohibition law, introducing instead the government’s control over the sale of alcoholic beverages.
It is worth mentioning again that, although Canada established monopoly capitalism during the interwar, this process took place in specific conditions. The Canadian economy in the interwar period was not yet sufficiently developed. Big part of the industrial equipment had to be imported from the USA. The production of the coal, oil, and iron ore was very little. But from 1924 until the late 1920’s, when the entire capitalist world was relatively stable, much of the branches of the Canadian economy have been on the rise. The hydropower, machinery, oil, aluminum, steel production, a number of manufacturing industries began to develop rapidly.
The high degree of concentration in this period was reached by the bank capital. From 1900 to 1928 there was a merger of small banks. As a result, instead of 40 banks only 10 operated, three of which – Montreal, Royal and Canadian commercial – concentrated about 70% of all banking capital of Canada.