Tax Policy for a New Era: Promoting Economic Growth and Fairness

Periodically, tax systems need major reforms to remove the "barnacles" that accumulate under the short-term pressures of political expediency and to adapt to the long-term forces of technological and economic change. The current fiscal and economic problems that confront the provinces require an assessment of much-needed reforms. Raising tax revenue imposes large costs on our society, not only because of the administration and compliance costs of collecting taxes, but because taxes distort economic decisions in the private sector. This is especially true of provincial corporate income taxes. Taxing highly mobile corporate capital and corporate profits encourages firms to shift their investments and profits across provincial and international boundaries. The provinces would enjoy significant boosts to economic growth and efficiency gains by enacting a revenue-neutral switch from corporate to sales or personal income taxes. For Alberta, such a shift would yield up to $40 per...

PSN: Taxation (Topic), 2018

This article addresses the question of whether the time has come for a comprehensive tax policy review in Canada. The author begins with the proposition that periodic broad-based reviews are necessary as an alternative to piecemeal policy making done through the often politicized annual budget process, and he sets out four sets of principles or attributes that characterize a good tax system. These include fairness, equity, and legitimacy; neutrality and economic efficiency; simplicity, administrative feasibility, and certainty; and international competitiveness. The author then proceeds with an examination of the latter two sets of principles, using a number of available indicators of how well our existing tax system measures up against each of them. He concludes that evidence using these two principles alone suggests that there is sufficient scope for improvement in the existing system to merit a comprehensive policy review. He also provides some brief corroborative commentary on t...

2008

The conference launched the Foundation’s first intensive look at comprehensive personal income tax reform—an issue that has important implications for how governments finance public services as well as for individual Canadians concerned about their tax burden. Aimed at academics, public policy analysts, and federal and provincial government officials, the conference looked first at the need for reform, the process of reform, and the relationship between personal income taxes and other federal, provincial, and local taxes. Then the focus moved to the specifics of reform: the base, the rates, indexation, and interactions with the social transfer system. The appropriate treatment of retirement savings and the broader issue of the tax treatment of savings rounded out the formal papers.

2001

Tax reform in Canada, The Fraser Institute, Vancouver, 2001

Canadian Tax Journal, 2008

The author examines Canadian corporate income tax policy, focusing on the implications of international capital mobility, international tax competition-including the need for a corporate tax structure that is competitive with respect to the United States and other competing economies-and international tax avoidance. He begins by considering the arguments for tax exemption or even subsidization of capital income, and then examines the many qualifications to these arguments. His analysis pays particular attention to the implications of the existence of firm-specific and location-specific economic rents and the issues raised by new techniques for international tax avoidance. In all cases, the discussion of theoretical arguments is followed by an examination of the empirical evidence, including studies specific to Canada as they are available. The author then traces the implications of the analysis for corporate income tax policy in Canada, including the recently enacted corporate income tax rate reductions and other potential reforms. Keywords: Canadian n Corporate inCome taxes n business taxes n tax reform n international taxation n international tax avoidanCe n Capital movement

This paper examines tax policy priorities at the provincial level in an international and national context. Canada needs a change in emphasis in the formulation of tax policy—away from distributional considerations and toward a pro-growth tax regime that would lower the disincentives to work, to save, and to invest. With provincial deficits to varying degrees under control, and with the opportunity for provincial income taxation to move toward a "tax-on-income" approach in 2001, Canada's current fiscal, economic, and legislative environment offers a good opportunity to reduce and restructure taxes at the provincial level. Provincial tax policy should focus on a substantial flattening of the marginal rate structure coupled with an increase in the basic personal amount, a change in the tax mix away from income taxation and toward sales or consumption taxation, and a reduction in corporate tax rates. In light of these priorities, this paper evaluates the tax reforms that ...

SSRN Electronic Journal, 2000

Tax rate changes are some of the most significant and far-reaching decisions a government can take. A good understanding of the odds of any such changes is essential for any business debating the timing and location of investments. This paper investigates the factors that affect the timing of statutory tax rate changes by Canadian provincial governments. The authors develop a simple theoretical model to explain the "stickiness" of tax rates-the factors that lead a province to decide against tinkering with the tax system-based on the presence of fixed costs of adjusting tax rates. The results indicate that if the current rate falls within a range of tax rates bracketing the optimal rate, then the government will not adjust its tax rate because the cost of the reform outweighs the potential benefits. To build up a body of evidence, this paper employs a multinomial logit model to examine the likelihood of changes to personal income tax (PIT), corporate income tax (CIT), and provincial sales tax (PST) rates by provincial governments over the period 1973-2010. Regression results indicate that provincial governments that start with higher tax rates are more likely to cut, and less likely to raise, their tax rates. A higher provincial budget deficit reduces the probability of a CIT rate cut and raises the probability of a PST rate increase. Party ideology seems to matter. Provinces with leftleaning governments are less likely to cut PIT and PST rates, and more likely to raise PIT rates compared to non-left-leaning governments. The authors also find that a federal PIT rate cut raises the probability of a provincial PIT rate increase, whereas a federal CIT rate cut raises the probability of a provincial CIT rate reduction. † We would like to thank Kenneth McKenzie, Anindya Sen, and participants at the 47th Canadian Economics Association meeting in Montreal and Deloitte Tax Policy Research Symposium in Toronto. All remaining errors are our own.

The purpose of this brief is to assess the impact of those measures on income distribution, in two ways. First, the Institut du Nouveau Monde (INM) produced two budget bulletins last year, where we sought the opinion of some 20 Canadian economists and public policy experts on how the measures of the 2015-2015 federal and provincial budgets will affect inequality. We then aggregated their quantitative responses in order to estimate what impact a policy may have on social inequality. We carried out the same exercise this year, with an expanded panel of 33 renowned experts. The second part of this brief will present the panellists’ assessments and analyses of the three measures found in Bill C-2. We will see that they could all potentially reduce inequality.