A tax system should be fair, efficient and simple. Canada has not comprehensively reviewed its taxation system against these criteria since the 1960s. It’s time.
Many organizations are now calling on the federal government to establish a comprehensive review of Canada’s tax system. Below is a list of recent reports making the case.
- Advisory Council of Economic Growth
Investing in a Resilient Canadian Economy (2017)
The government must review Canada’s tax system to ensure it spurs investment and competitiveness. When the country last conducted such reform decades ago, investments in physical assets were more important and global trade less so than they are today. Our tax system must be updated for the modern economic era— to safeguard Canada’s status as a globally competitive tax jurisdiction and to ensure that it incentivizes investments in innovative technologies and intellectual capital.
- Canadian Chamber of Commerce
50 Years of Cutting and Pasting: Modernizing Canada’s Tax System (2019)
The last time Canada undertook a comprehensive review of its tax system, humankind had yet to set foot on the moon. In the five decades since, repeated cutting and pasting has left Canadian taxation uncompetitive, cumbersome and inefficient.
- Canadian Manufacturers and Exporters
Restoring Canada’s Tax Advantage: A Need for Tax Reform (2019)
The Government of Canada should appoint a Royal Commission on Taxation chaired and staffed by tax and economic policy experts to review Canada’s tax system. The Commission should be tasked with making wholesale reforms that modernize and simplify. Canada’s tax code. The overarching goal of these reforms should be to create a tax system that encourages innovation, investment and economic growth.
- C.D. Howe Institute
Tax Policy Next to the Elephant: Business Tax Reform in the Wake of the US Tax Cuts and Jobs Act (2019)
The US tax reform presents significant challenges for Canada. However, it also provides an opportunity to make a bold move toward a corporate tax system that is grounded in sound tax policy principles, is less distortionary, promotes economic growth and prosperity, and restores Canada’s tax competitiveness on a worldwide basis.
- Chartered Professional Accountants (CPA) Canada:
International Trends in Tax Reform: Canada Is Losing Ground (2018)
Many of Canada’s international peers have undertaken comprehensive reforms or full-scale reviews of their tax systems. Canada has yet to join in with a comprehensive review. As a result, there are implications for Canada’s competitiveness.
Canada’s Tax System: What’s So Wrong and Why It Matters (2019)
Canada's last thorough review of the tax system was concluded in 1967. Since then it has become bloated, complex and inefficient, having accumulated a patchwork of credits, incentives and narrow fixes. This dated, inefficient system is holding Canadians back.
The Best Way Forward: Designing A Tax Review for Canada (2019)
A sound tax system is essential to Canada’s competitiveness. Until we take a more universal approach to fix it, Canada’s competitive advantage will continue to fade, and prospects for sustainable growth and prosperity will continue to dim for Canadians, Canadian businesses and our economy overall.
Nanos-CPA Canada Public Opinion Survey on Canada's Tax System (2019)
Almost half (47%) of Canadians say the tax system has become more complex than it was 10 years ago, while 37% say it has stayed the same, and only 5% of Canadians feel the tax system is less complex. 81% of Canadians see a comprehensive tax review as a priority for the federal government. Of those, more than one in three (35%) say it should be a high priority, which is an impressive figure given that tax is not always a top-of-mind issue among Canadians.
- Fraser Institute
Tax Complexity In 2019: Can It Be tamed? (2019)
What is clear is that our indicators suggest an increase in federal tax complexity since the turn of the century: the number of credits, deductions, exemptions, exclusions, and other preferences, the text length of tax legislation, and the size of the federal personal income tax guide all increased by double-digit percentages. Federal tax complexity is clearly increasing in Canada over time.
- International Monetary Fund (IMF)
CANADA: Staff Concluding Statement of the 2018 Article IV Mission (2018)
It is time for a careful rethink of corporate taxation to improve efficiency and preserve Canada’s position in a rapidly changing international tax environment. Given its centrality to the architecture of the tax system as a whole, this requires a holistic review, which Canada has not had for some time. The U.S. tax reform increases the urgency of moving ahead with the review.
- Organisation for Economic Cooperation and Development (OECD)
OECD Economic Survey of Canada (2018)
Although important actions have been taken over the years to improve the competitiveness of the Canadian corporate tax system, a comprehensive review of the overall tax system may be helpful in determining how Canada can further attract investment. The government should review the tax system to ensure that it remains efficient -- raising sufficient revenues to fund public spending without imposing excessive costs on the economy -- equitable and supports the competitiveness of the Canadian economy.
- Ontario Chamber of Commerce
Federal Pre-Budget Submission (2019)
It is time for a comprehensive review of Canada’s tax system. This should include, but is not limited to the following: eliminating inefficient or poorly targeted tax credits; reducing complexities and inefficiency; and enticing new investments through a commitment to keeping corporate taxes low.
- University of Calgary School of Public Policy (Philip Bazel, Jack Mintz and Austin Thompson)
2017 Tax Competitiveness Report: The Calm Before the Storm (2018)
Reforms in the U.S. are going to make that country a much more attractive place for investment than Canada because of the new tax advantages. However, Canada doesn’t have to accept this diminished status. Federal and provincial governments can do a number of things to offset the U.S. reforms.
Corporate tax rates should be reduced so as to achieve a more neutral corporate tax structure. By doing things like scaling back the small business deduction and accelerated depreciation, Canada can reduce its corporate tax rate to 23 per cent, which would be just a bit below the U.S.’s combined federal-state figure without losing revenue. Sales taxes on capital purchases could be eliminated in some provinces, reforms could be made to the taxation of international income and incentives for debt financing reduced. Carbon revenues could be used to provide an offset for higher energy taxes businesses face in Canada.
