Alarm clock with stacks of coins against a sunny morning sky

CPA Canada itself has long advocated for a tax system overhaul to ensure efficiency and remain competitive. (Photo by shutter_o/Shutterstock)

Canada | Finance

No time like the present for tax reform in Canada, says global community

CPA Canada report suggests taking inspiration from other countries’ best practices to help overhaul the Canadian tax framework

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A call out for tax reform in Canada is no surprise. It’s a clarion call amongst a growing number of stakeholders including international players like the  and , as well as leading national organizations and both finance committees in the House of Commons and the Senate of Canada. 

CPA Canada itself has long advocated for a tax system overhaul to ensure efficiency and remain competitive. With the recent U.S. tax reforms implemented and mounting tensions during NAFTA negotiations leading to the new USMCA (United States-Mexico-Canada Agreement), the chorus has only strengthened.  

In the wake of all this, and in advance of , CPA Canada released the first of three reports—International Trends in Tax Reform: Canada is Losing Ground—in October. The report looks at how other countries have approached major tax reforms and reviews, how Canada is lagging in the tax arena and the resulting implications for Canada’s competitiveness. The last comprehensive tax review in Canada was more than 50 years ago—now is the time to act, the report says.  

“Nationally and internationally, a growing range of stakeholders agree that a tax system review should be priority for the Government of Canada,” it says. “As this movement continues to gather steam, CPA Canada believes it’s time to deepen the conversation. Whether a large-scale review is needed is no longer a question; it’s time to move the debate from whether to how.”  

The report also focuses on Canada’s position amid other developed nations, highlighting how many countries—including some of our key trading partners such as the U.S., France, the Netherlands and Japan—have, or are in the process of reviewing or reforming, their own tax systems.  

Until recently, Canada enjoyed a competitive advantage with its low corporate tax rate compared to other G7 countries. But as more countries move towards tax reform to increase efficiency, effectiveness, competitiveness and fairness, Canada has lost its competitive edge. Other factors—such as tax complexity and overregulation—that can make it harder to do business in Canada are also coming into sharper focus, the report says.  

“As these trends have continued, the U.S. tax reform package and ongoing uncertainty over trade have brought Canada to the tipping point,” the report shares. “…raising concerns about our future prospects and casting doubt on the country’s ongoing tax competitiveness.”  

“Canada needs to act now more than ever, or we will be left trailing the pack,” stresses Bruce Ball, FCPA, FCA, vice-president of taxation at CPA Canada. “The report is valuable in that it provides context around what is happening on the global stage and it reinforces why we are witnessing a call to action in this country.” 

Looking to three countries in particular—the U.K., New Zealand and Australia—that have undergone review and reform, the report shares best practices and lessons learned, that could be referenced during Canada’s own tax-reform process.  

MOVING AHEAD

Key takeaways from the ,  and  include: 

  • Independence, transparency and broad consultation 
  • Principle-based approach defining what an ideal tax system should look like and gauge the current system and proposed measures against those principles.   
  • Long-term approach over short-term fixes 
  • Allowing for a reasonable timeframe for analysis, consultation and consensus building 
  • Broad-scope analysis that considers all aspects of the tax system and how they interact with each other and social systems. 
  • Consider practical issues related to transition and implementation 
  • Commitment from government to implement recommendations as an integrated package 

FOR MORE

CPA Canada’s next report, due out later this fall, takes the discussion another step forward, highlighting some of the most harmful issues with Canada’s tax system and their impacts. In the meantime, check out the International Trends in Tax Reform: Canada is Losing Ground report in more detail.