It’s tax season in Canada again. That makes it a good time to take a look at how the tax system actually works in Canada. Canada’s tax system is incredibly complex and riddled with loopholes, which leads to multiple headaches for citizens and businesses alike. It makes filing our taxes so complex that a trip to the dentist for a root canal would be preferable. It also causes extra time and hassle for business owners as they try to figure out exactly which parts of the tax code apply to them. Some of the various tax credits created in recent years, such as those for children’s art programs, are incredibly specific and only apply to very certain groups of Canadians.
People have been calling for tax reform for decades. In the 1987 book If I Were Prime Minister, dozens of then-prominent Canadians wrote essays about what they’d do if they were Prime Minister. One of the most common themes contributors talked about was the problems with Canada’s tax system, which they argued was badly in need of reform more than 35 years ago. More recently, the likes of former Parliamentary Budget Officer Kevin Page, Canadian Institute of Chartered Accountants President Kevin Dancey, economists Jack Mintz and Kevin Milligan and political writers Mel Hurtig, Murray Dobbin and Andrew Coyne have made similar calls. These commenters come from across the political spectrum, but they all agree that the federal tax code needs an overhaul.
Anecdotally, I’ve talked to left-wing friends about how tax reform could provide more money for things like social supports and infrastructure. Meanwhile, right-wing business owners have vented to me about how much of a headache doing their businesses’ taxes are. That suggests to me that broad-based tax reform could get support from across the political spectrum if it’s handled correctly.
What would such a tax reform look like?
The first thing I’d want to look at would be all the deductions and credits that fill the system right now. I personally think tax credits should be broad and apply to as many people as possible. One of Stephen Harper’s best tax credits was the one he passed to support families with disabled children. Almost anyone can raise children, whether by conceiving or adopting them, and almost anyone can have their lives impacted by disabilities.
Harper’s other credits, such as for children’s fitness and university students’ textbooks, were criticized for being skewed towards middle- and upper-income families and failing to encourage the changes they were meant for. Those critiques came from the Frontier Centre for Public Policy, a right-wing think tank not known for its leftist street cred. Some of Justin Trudeau’s best tax changes have been to dump these ‘boutique’ credits.
That’s just one example of the kind of broad tax reform I think Canada would benefit from. Raising more money by eliminating loopholes, while also making it easier for Canadians and their businesses to file their taxes, could be a huge benefit.
Who knows, it might even make tax season more bearable.