Macartney: Canada needs a new royal commission on taxation
Author: Gerry Macartney
Armed with a paper developed by the London Chamber of Commerce, the Canadian chamber — representing more than 200,000 businesses — has developed its most comprehensive policy position, calling on the federal government to strike a royal commission on tax reform.
The last time Canada undertook a comprehensive review of its tax system (the Carter Royal Commission in the 1960s), humans had not yet set foot on the moon and in the five decades since, repeated cutting and pasting has left Canadian taxation uncompetitive, cumbersome, inefficient and anything but modern.
Today, technologies, supply chains and competition are completely different and have disrupted entire industries, if not our entire economy. Every country is trying desperately to harness innovation as well as cope with artificial intelligence and the sharing economy as they reshape how we live and work — and how we tax.
As we recommended in our policy resolution at last year’s national chamber convention, now more than ever a royal commission on taxation, with everything on the table, is essential to align Canada’s tax system with new global economic realities.
The Canadian chamber’s report, 50 Years of Cutting and Pasting, which was released this month, lays out facts, figures and recommendations.
If one were to measure overall economic performance against three critical pillars — the ability to attract capital, investments in talent and skills, and organizational agility to keep up and compete — Canada would fail on all three counts, according to the comprehensive study released by the Canadian chamber.
While the accelerated capital cost allowance measures announced last fall sound good, we believe they lack what’s needed to spur necessary investments. Our dauntingly convoluted tax system ranks 41st in the world in the time it takes to prepare and pay taxes. Meanwhile, the U.S., Japan and the rest of our largest trading partners are enhancing their competitiveness through targeted tax reforms and thorough reviews of global tax systems.
Chamber members across the country believe our tax system hampers investment and ability to attract talent.
The International Monetary Fund recommends a “careful rethink of corporate taxation to improve efficiency and preserve Canada’s position in a rapidly changing tax environment.”
Looking at G7 and OECD countries, there is a sustained trend on greater tax competitiveness.
How many hints do we need?
Such a royal commission’s terms should be guided by the principles of tax competitiveness, simplicity, fairness and neutrality. The inquiry should explore the following aspects:
Broadening the tax base to explore the most effective tax policy solutions
Adjusting the tax mix to better promote business investment and economic growth
Bridging the digital tax divide to ensure a fair and equitable tax system
Simplifying the tax filing experience with digital filing solutions
Legislating a taxpayer charter of rights to hold CRA accountable
Providing a representative for small business to resolve CRA conflicts
Conducting regular comprehensive reviews to keep the system up to date
Given the global tax environment we are in, a royal commission focused on modernizing Canada’s tax system provides a great opportunity. Simply tacking on a bunch of new parts to a model that was designed 50 years ago, complete with the archaic principles that held it together, won’t resolve our tax competitiveness issues.
Time’s a wasting.
Gerry Macartney is chief executive and general manager of the London Chamber of Commerce.