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What you need to know about COVID-19: August 10, 2020
About a year and half ago, the Canadian Chamber of Commerce called on Prime Minister Justin Trudeau to appoint a Royal Commission to conduct a top-to-bottom review of the tax system.
The Chamber must have known the idea was dead on arrival, but why not take the shot? The International Monetary Fund and the Organization for Economic Co-operation and Development have both long thought that Canada’s approach to taxation is smothering its economic potential, so maybe a push from the country’s main business lobby could finally tip the balance.
Nope. It went nowhere.
So instead of being well on our way to some good ideas, we instead will build a COVID-19 recovery plan on a tax regime that is uncompetitive, inefficient and grossly unfair.
Governments will end up spending more to correct market failures because the tax system does such a poor job of encouraging investment and rewarding entrepreneurship. A homegrown financial crisis will remain a present danger, in part because consumption and property taxes are relatively low, privileging borrowing and spending over saving.
And If the COVID-19 crisis has pushed all of us closer to mental exhaustion, then the 2021 tax season might be a death blow, as a lockdown-weary nation confronts some of the world’s most complicated tax forms. If the recession drags, the Canada Revenue Agency could perhaps train an army of temporary tax filers to relieve our burden, a 21st-century version of the public work projects that governments deployed to counter the Great Depression.
“We have a tax system that is overly complicated, virtually impossible to administer from the tax authority’s perspective, and very difficult to comply with as taxpayers,” Pamela Cross, an Ottawa-based partner at law firm Borden Ladner Gervais LLP, said in an interview. “Most individuals with fairly straightforward situations should be able to do their own tax returns. Many people can’t anymore.”
We have a tax system that is overly complicated, virtually impossible to administer, and very difficult to comply with
The Chamber isn’t giving up. There will be no shortage of issues for a national lobby group to tackle in the aftermath of COVID-19 recession, and the country’s largest business organization has decided to have another go at tax reform.
Cross, who has been advising Borden clients since 2000, is one of eight “special commissioners” who will spend the next few months overseeing national consultations on an overhaul that would reset the tax system for the post-COVID era.
“Canada will have to walk a fiscal tightrope between the need to reduce debt and deficits and supporting economic growth,” Perrin Beatty, the former Progressive Conservative cabinet minister who leads the Chamber, says in a press release that was set for publication on July 30. “Reconceiving our tax system to rebuild our economy will be critical to Canada’s ability to recover from COVID-19’s impact.”
The Chamber and its 200,000 members have struggled to get on the same page as Trudeau’s government, an administration that is essentially bereft of executives, lawyers and politicians with obvious sympathy for what it takes to run a company.
“The business Liberals of old seem to be extinct, presumably because their perspective is not valued the way it once was,” Queen’s University professor Eugene Lang, a former cabinet-level staffer in Jean Chrétien’s government, wrote in Policy Options earlier this year.
Canada will have to walk a fiscal tightrope between the need to reduce debt and deficits and support economic growth
At the same time, too many of Canada’s executives have refused to acknowledge that Trudeau’s ascent represented a shift in the public’s priorities.
The most obvious example came ahead of the 2019 election, when the Chamber, after polling its members, submitted a long list of policy priorities and not one of them related to climate change. The Chamber’s report on tax reform last year was good, but it was based on the advice of an advisory panel of six white men. What’s a government whose political identity is tied to the environment and gender parity supposed to do?
Fortunately, the Chamber has made an effort to assemble a more diverse group of advisers this time.
Cross will be joined by Tabatha Bull, chief executive of the Canadian Council for Aboriginal Business; Carole Chouinard, a partner at law firm Gowling WLG International Ltd.; and Frances Donald, global chief economist at Manulife Investment Management.
Trevin Stratton, the Chamber’s impressive chief economist, also is a member of the group. The others are Gaël Campan, an economist at the Montreal Economic Institute, a research outfit that tends to bring an orthodox world view to policy; Jamie Golombek, managing director of tax and estate planning at Canadian Imperial Bank of Commerce; and the University of Calgary’s Jack Mintz, a tax expert who is especially influential with Conservatives, such as Pierre Poilievre, the Opposition finance critic.
Their work was scheduled to begin next week with a video conference that will gather input from Western Canada. The plan was to hold four more such gatherings to hear from people in Ontario, Quebec, Atlantic Canada and the North. Cross said their goal is to publish a report with specific recommendations by early October.
Trudeau and his ministers should pay closer attention this time.
“We need to support Canada’s recovery out of this current problem,” Cross said. “How are we going to do that? It won’t be only the public sector. We need a tax base that can support the investments that will have to be made.”
Copyright Postmedia Network Inc., 2020