Tax system review: It’s time

With the 2019 federal election coming soon, CPA Canada is urging political parties to commit to a comprehensive tax review. Canada’s future prosperity depends on it. Three reports explain why and point the way forward.

Canada urgently needs a tax system review — as a rising number of parliamentary committees and leading organizations agree. Once the federal election is behind us, the incoming government should commit to tax reform and tackle a growing threat to our competitiveness and prosperity.

The tax system plays a crucial role in supporting inclusive economic growth in the best interests of Canadians. At a time when economic growth is stagnant and the income gap is steadily expanding, Canada must take action to ensure we continue to create jobs, attract investment and remain competitive.

Canada has not undertaken a holistic review since the 1960s. Over that time, incremental ad hoc changes have obscured the underlying tax framework and its integrity. Given the rate of change in every other aspect of the domestic and global economy, there is a pressing need to strip away those accumulated layers and rethink how Canadians are taxed. A streamlined, updated system would reduce administrative costs for individuals, businesses and government alike.

We believe Canada should launch a full review of our tax system as early as possible — to ensure it is designed to ease compliance for the taxpayer, is internationally competitive, and has a goal of becoming one of the world’s fairest, simplest and most efficient.

From think tanks to academics to business associations, there is broad consensus that the federal government needs to make tax reform a top priority. Reports from committees in both the House of Commons and the Senate, as well as the Advisory Council on Economic Growth, have made recommendations that range from tax simplification to a full tax review. Similar calls have been made internationally by the Organisation for Economic Co-operation and Development. 

Findings from a recent Nanos Research poll show that 81 per cent of Canadians see a comprehensive tax review as a priority for the federal government. Of those, more than one in three (35 per cent) say this priority should be high. Further, the CPA Canada Business Monitor for the first quarter of 2019, based on a Nielsen poll of CPAs who are business leaders, shows that two-thirds of respondents want political parties to include a tax system review in their election platforms.

At CPA Canada, we’ve developed three reports that analyze the current tax system’s sorry state and show how a made-in-Canada review might be designed, highlighting lessons learned from recent tax reviews conducted in the U.K., Australia and New Zealand:

  1. International Trends in Tax Reform: Canada is Losing Ground
  2. Canada’s Tax System: What’s so Wrong and Why it Matters
  3. The Best Way Forward: Designing a Tax Review for Canada

View these reports, along with updates on CPA Canada’s activities in this area.

Of course, any comprehensive tax reform exercise would need to overcome many hurdles, both logistical and political. But Canada’s competitiveness is at stake and time is of the essence. Following the federal election, the incoming government should commit to improve Canada’s competitive edge by making a tax system review a key initiative early in the next mandate if they were to form government.

KEEP THE CONVERSATION GOING

What aspects of Canada’s tax system do you believe are most in need of reform? Post a comment below.

CPA Canada’s Tax Blog is designed to create an exchange of ideas on tax policy and practice issues, and their impact on those who practice tax. Your comments can provide helpful input into the public interest advocacy positions developed by CPA Canada.

About the Author

Bruce Ball, FCPA, FCA, CFP

Vice-president, Taxation, CPA Canada