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Unprecedented support for tax review as federal budget approaches

Business groups, parliamentary committees and international organizations join CPA Canada’s call for a comprehensive overhaul of the Canadian tax system

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Canadian Finance Minister Bill Morneau speaking at a international economic and financial strategyAs the federal government is preparing to table a new budget on March 19, CPA Canada's call for a re-examination of the current tax framework is joined by groundswell of support  (Getty Images/Jason Lee-Pool)

A new report from CPA Canada firmly supports the growing chorus of voices calling for a comprehensive review of Canada’s tax system. 

As these widespread voices are being raised, the federal government is preparing to table a new budget on March 19. Beyond CPA Canada, a groundswell of support for a tax review is coming from a significant number of national organizations, parliamentary committees, thought leaders, and well-respected domestic and international bodies.

“The extraordinary level of support for a tax review presents a golden opportunity for the federal government to act,” explains Joy Thomas, president and CEO, CPA Canada. “Stepping forward and announcing a review would pave the way to create a better tax system that positions Canada for both economic growth and social development. If the government does not announce this much-needed initiative in the federal budget, CPA Canada will urge it and other parties to demonstrate their commitment by making a tax system review a key pledge in their campaigns for the upcoming federal election.” 

The new CPA Canada report titled The Best Way Forward: Designing a Tax Review for Canada states: “With more than 50 years since our last full-scale tax review, the current tax system is in a sad state of repair, while our global peers, including the U.S., are leveraging their tax systems in an effort to boost their own competitiveness.” 

The paper builds on previous reports from CPA Canada, which examined what Canada’s global competitors are doing to improve their tax regimes and how this country’s tax system is hurting Canadians, impeding business success and stifling our global competitive position. 

Concerning aspects of Canada’s tax system include a system that is negatively impacting foreign investment and how our businesses position themselves; uncompetitive personal income tax rates and thresholds; and tax complexity that makes it difficult for lower income and vulnerable Canadians to access much-needed income supports.

LEADING VOICES 

National organizations are joining the call for a re-examination of the current tax framework, including the Canadian Chamber of Commerce, which says the consensus of the Canadian business community is loud and clear. “We need a comprehensive review, with everything on the table, to create a modern tax system that can help build a Canada that wins,” a recent Chamber report says.

Others recommending the government undertake a tax review are three key parliamentary committees, the influential Advisory Council on Economic Growth established by the federal Minister of Finance, and some of the most respected domestic and international stewards of public policy, including the C.D. Howe Institute, the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD).

A report from the Advisory Council on Economic Growth says the government must review Canada’s tax system to ensure it spurs investment and competitiveness. “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.”

In addition, the most recent CPA Canada Business Monitor found that 79 per cent of the CPAs in leadership positions surveyed believe a tax review is required. Two-thirds (66 per cent) of the respondents are calling for political parties to make prioritizing a review part of their 2019 federal election campaign platforms.

THE BEST WAY FORWARD

CPA Canada’s latest tax report sets out a clear path for undertaking an effective and successful investigation of how to overhaul Canada’s tax system. It suggests that a review must focus on making the tax system simpler, fairer, more efficient and internationally competitive. A review must also prioritize modernizing the tax policy that underlines the system, as well as ensuring changes to the CRA and tax administration to ease compliance for taxpayers.

CPA Canada believes that establishing an independent expert panel to conduct the tax review would best serve the government’s purpose. Others support a royal commission.  In the end, the actual process or mechanism is of secondary importance. It is the outcome that truly matters the most—achieving a world-class tax system that benefits all Canadians and our economy.

“A sound tax system is fundamental to creating a competitive business environment, a strong economy and a fair society,” says Thomas.   

READ CPA CANADA’S REPORTS

The Best Way Forward: Designing a Tax Review for Canada follows the two earlier reports in CPA Canada’s series. International Trends in Tax Reform: Canada is Losing Ground compares the situation in Canada with global competitors and finds that Canada is falling behind, and Canada’s Tax System: What’s so Wrong and Why it Matters reveals the problems our out-dated and overly complex system creates for people and businesses.