The last major overhaul of Canada’s tax system occurred almost 50 year ago with in The Income Tax Act of 1972. Since that time, Saskatchewan and Canada’s economy have changed considerably. Capital and highly-skilled workers are more mobile than ever before; supply chains across North America are highly integrated; disruptive technologies and processes like e-commerce, artificial intelligence and the sharing economy are now a reality; and Canadians companies must now complete in a global marketplace.
While rates on personal and corporate income taxes have ebbed and flowed over the past five decades, in recent times the overall tax burden on businesses has been increasing. Businesses both large and small in Saskatchewan are concerned the current tax system is negatively impacting their ability to attract and retain highly-skilled labour and make the kinds of capital investments necessary to drive innovation. Canada’s byzantine approach to taxation was recently manifested in the ill-advised tax changes to Canadian-controlled private corporations proposed by the Federal Government back in July 2017.
To put it simply, the usual approach of incremental tinkering at the margins is no longer feasible. This is especially true in light of the recent tax changes in the US, as well as in other advanced economies like the UK and New Zealand. A 21st century economy requires a 21st century taxation system.
Per the Canadian Chamber of Commerce, the tax system of the 21st century should be designed with economic competitiveness, simplicity, fairness, and neutrality in mind. Important considerations should also include reducing or eliminating barriers to compliance. This includes finding ways to reduce the administrative burden on businesses (particularly for SMEs) measured in terms of hours spent preparing and paying taxes.
Echoing the sentiments of the Canadian Chamber of Commerce and other business groups across Canada, the SCC recommends the Federal Government undertake a comprehensive review of the tax system by means of a Royal Commission. A strong commitment from political leaders at both the provincial and federal level is necessary to make that happen.