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Canada’s tax system is simply not working anymore. Canadian Businesses say it is deterring investment and driving it elsewhere. The general worry is that tax system is affecting our ability to bring labour, talent and skills to our economy. Our members tell us it will affect their ability to expand and compete, leading to slower economic growth.
After decades of cutting and pasting, navigating our bloated and byzantine tax code is a significant challenge for local businesses. Small businesses in particular do not have dedicated departments to grapple with complicated tax filing or manage the onerous burden of dealing with the Canada Revenue Agency.
The tax system has real costs for businesses in terms of both time and money. Canada needs a Royal Commission on tax to conduct a whole-of-system review and build a new system from the ground up.
This comprehensive review should look at:
- 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.
- Further 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 conflicts with CRA.
- Conducting regular comprehensive reviews to keep the tax system up to date.
We need a Royal Commission to fix our tax system because it is cumbersome, inefficient and a burden on business. This requires a combination of prudent government spending, simplifying a byzantine tax code and getting the tax mix right.
Given the competitive environment that we’re in, we need to seize the opportunities that are within our control. What we need is a Royal Commission, with everything on the table, to create a tax system that helps ensure Canada is a preferred destination for the talent, skills and investment needed to compete in a changing economic landscape.
The last time Canada undertook a comprehensive review of its tax system, humankind still hadn’t set foot on the moon. If we’re serious about improving our competitiveness and spurring innovation, then we need a modern tax system that is aligned with the economic realities of today.
By any measure, Canada’s tax system is a failure to Canadians and the businesses that employ them, deterring investment and the attraction of top talent, and wasting valuable time on compliance. We need to rebuild modern tax system for the economy of today and tomorrow.
Simply welding new parts onto an expired model, complete with the antiquated principles that underpin it, will not resolve our competitiveness issues.
We need to create a tax system that is fair, efficient and modern, one that is easier to comply with, particularly for small and medium enterprises (SMEs). The time they spend preparing their tax returns is valuable time they could be spending running and growing their business.
Canadian businesses spend 131 hours on average preparing and paying their taxes. That is more than three weeks wasted productivity, when other countries do it in half the time.
Overall, Canada ranks 41st in the world in the time it takes to prepare and pay taxes, 22nd in corporate taxes and 23rd in personal income taxes.
Recent U.S. tax reform has also eliminated one of Canada’s main competitive advantages for investment attraction and retention.
Many of the world’s most developed economies – and some of Canada’s biggest trading partners – have implemented or pursued major tax reforms in recent years. The current changing global tax environment not only provides an excellent opportunity for Canada to rethink its own system, but practically requires it. Canada cannot be caught crawling, while other countries leap ahead in tax policy.