Every day throughout Canada, the daily lives of Canadians and businesses are negatively impacted by our outdated tax system. Through recent research, we have heard about a person with a disability in Nova Scotia missing out on tax credits due to the paperwork required; a single mother in British Columbia wrestling with a decision to go back to work and losing benefits as a result; a charity care home in Ontario getting wrapped up in a two-year dispute with the Canada Revenue Agency over a tax bill and seeing patient care suffer; and a small company in Manitoba missing out on tax credits, for apprentices and for research and development, due to the time and money required to apply and the uncertainty of success.
The reality is Canada’s tax system is no longer fit for purpose and it is hurting Canadians, our competitiveness and our economy. Parliamentarians seem to agree. Standing committees in the House of Commons and the Senate have recently recommended that the government launch an independent review of our tax system—and for good reason.
Canada’s last tax review was concluded in 1967 when the world was a very different place. In the intervening 52 years we have seen a dramatic transformation in what were once seen as traditional family roles, a digital revolution that has bought us technologies that were once the realm of science fiction, and an explosion in global trade and commerce. What has emerged over those many years is a far from perfect tax system saddled with a myriad of tax breaks and exemptions by successive governments that made it even more bloated and complicated. We can’t ignore this issue any longer.
Every year more than a thousand chartered professional accountants (CPAs) volunteer for clinics to help people fill out their tax forms and get the credits they are entitled to. Beyond those tax filers however, more than $1.2-billion in federal benefits for low-income households goes unclaimed each year due to complexity, according to Prosper Canada. Fewer than 40 per cent of the more than 1.8 million adults who report qualifying disabilities claimed the credit in 2012, as noted in a June 2018 study by the Standing Senate Committee on Social Affairs, Science and Technology. Even large multinationals struggle to navigate the intricacies of Canada’s tax system, let alone small family businesses across the country which in many cases cannot afford professional advice.
Many of the tax expenditures introduced over the years were done so with noble aims but now complicate the system and it’s not known if they are delivering on their goals. Among professional accountants in leadership positions, 79 per cent think a comprehensive review of Canada’s tax system is required, according to the CPA Canada Business Monitor survey in the fourth quarter of 2018. Among the perceived benefits of a comprehensive review of the tax system, 64 per cent of those surveyed think the tax system would become less costly and time-consuming for both individuals and businesses.
Canada has been warned by international organizations like the OECD and the International Monetary Fund that we need to get our tax house in order or risk the consequences. The recent report Canada’s Tax System: What’s so Wrong and Why It Matters captures both the research on what ails our tax system along with case studies from members of Chartered Professional Accountants of Canada.
A full tax review is clearly the necessary next step. It will not be a simple undertaking, but we can learn the lessons of other countries. We are now seriously lagging behind, and the world isn’t waiting for us. This must be a priority for the next parliament.
Bruce Ball, FCPA, FCA, is vice president of taxation at the Chartered Professional Accountants of Canada.
The Hill Times
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