Opinion: Canada needs a tax review and real reform, not tinkering

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions Saved Articles My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeFP CommentOpinion: Canada needs a tax review and real reform, not tinkeringThe last comprehensive look at our tax system was in the 1960s. Many small changes since then have added complexity and reduced efficiencyLast updated 56 minutes ago You can save this article by registering for free here. Or sign-in if you have an account.Minister of Finance and National Revenue Francois-Philippe Champagne rises during Question Period in the House of Commons on Parliament Hill in Ottawa on March 12, 2026. Photo by THE CANADIAN PRESS/Justin TangDuring the 2025 election campaign, the Liberals promised an expert review of the corporate tax system. Now, Finance Minister François-Philippe Champagne says he doesn’t need one. Instead, the government will simply hold consultations in advance of the fall budget.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThat will be music to the ears of lobbyists. The House of Commons Standing Committee on Finance has already received more than 1,300 submissions advocating changes of every size and shape in the upcoming budget, including targeted tax measures. Our tax code would be barely recognizable if all these requests were granted.It is now widely acknowledged that Canada has a productivity problem and that one reason for it is weak business investment. Though tax policy is not the only reason for this economic malaise, it is one of the few levers the government fully controls. But Canada doesn’t need another round of tinkering: it needs comprehensive tax reform.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againOver the past decade, Canadian corporations have been hammered by several convoluted legislative initiatives championed by the Organisation for Economic Co-operation and Development (OECD) in the name of “global tax fairness.” These have included limitations on interest deductibility and a global corporate minimum tax.Our largest trading partner — the United States — did not adopt all of the OECD reforms, leaving Canadian firms at a competitive disadvantage. To try to make Canadian business more competitive, Ottawa added accelerated tax depreciation and other preferences and credits — measures that complicate the tax system, distort investment decisions and create winners and losers.Canada has not undertaken a comprehensive review of its tax system since the Carter Commission more than 60 years ago. A top-to-bottom review is now long overdue. An expert panel should take a blank sheet and consider our corporate tax system from scratch. Among the questions it should ask: Should some of the OECD-led initiatives be repealed? Is our corporate tax rate too high? Should accelerated depreciation and other targeted tax incentives be retained, expanded or repealed? Or should we repeal the corporate income tax and tax cash flows instead, which many economists believe would be more efficient? No finance minister, however capable, can undertake that exercise alone.As for personal income taxes, the top federal-provincial rate is at or above 53 per cent in most provinces, while the average top federal-state rate in the United States is only about 42 per cent. Moreover, our top rate kicks in at much lower income levels. Statistics Canada reports that increasing numbers of young, highly educated individuals are leaving — despite Donald Trump and despite U.S. health-care costs. Our high marginal tax rates are likely one of the reasons for this outflow.An expert panel should consider whether Canada should reduce its top personal rate to below the psychological barrier, as the Carter Commission referred to it, of 50 per cent, and whether our personal tax brackets should be adjusted.How would we pay for corporate and personal income tax reductions? One option an expert panel likely would consider is a higher GST. Most economists agree that consumption taxes are less harmful to economic growth than income taxes. Compared with most other OECD countries, we rely too heavily on income taxes and too little on consumption taxes.Raising the GST rate from its current five per cent to eight would raise roughly $30 billion a year to offset the revenue lost because of cuts in income tax — with enhanced GST credits completely cushioning the impact on lower-income households. The effect would be no overall increase in Canadians’ tax burden, but less tax on work, investment and entrepreneurship and more on consumption. Such a shift from taxing income to taxing consumption would boost economic growth and job creation.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Australia, the U.K., New Zealand and Norway, among others, have conducted comprehensive, independent reviews of their tax systems in recent years. As mentioned, our last comprehensive review was in the 1960s. Almost every aspect of Canada’s economy has changed since then.Today’s economy is driven more by services, technology and intangible assets, and less by manufacturing. Our population is older. Issues such as housing, income inequality and carbon pricing are front and centre. And international competitiveness has become more important than global tax fairness.While many of the Carter Commission’s basic principles — “a buck is a buck is a buck” — are still relevant today, the emergence of the digital economy and the dramatic increase in capital mobility means our tax rules have to change. To help address our productivity problem, we need a fresh look at Canada’s tax code.Allan Lanthier, a retired partner of an international accounting firm, has been an adviser to both the Department of Finance and the Canada Revenue Agency.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.