Chamber Leads National Call for Royal Commission on TaxationFebruary 20, 2019
Armed with a paper developed by the London Chamber, the national Canadian Chamber of Commerce, representing over 200,000 businesses has developed the most comprehensive policy position that calls 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, new technologies, global supply chains and international 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 coping with artificial intelligence and the sharing economy as they reshape how we live and work, and how we tax.
As we recommended in our own 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.
If one measures overall economic performance against three critical pillars, namely the ability to attract capital, investments in talent and skills as well as organizational agility to keep up and compete, Canada would fail on all three counts according to the comprehensive study released by the Canadian Chamber. And it’s not as if we have time to waste.
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. Yet, the U.S., Japan and the rest of our largest trading partners are laser-focused on enhancing their competitiveness through targeted tax reforms and thorough reviews of global tax systems.
Chamber members across the country believe our tax system actually hampers investment and talent attraction. Even 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”. Rethink indeed - we need more react than rethink.
Looking at G7 and OECD countries, there is a sustained trend on greater tax competitiveness. The OECD encourages Canada to “review the tax system to ensure that it remains efficient”. Really, how many hints do we need?
A Royal Commission terms should be guided by the principles of tax competitiveness, simplicity, fairness and neutrality. The inquiry should explore the following aspects through a comprehensive review:
• 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. 50 years of repeated cutting and pasting must stop. Simply tacking on a bunch of new parts to a model that was designed 60 years ago complete with the archaic principles that held it together, won’t resolve our tax competitiveness issues. A Royal Commission again based on the principles of Competitiveness, Simplicity, Fairness and Neutrality is our first and best hope. Time’s a wasting.
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