MADE IN CANADA – INCLUSIVE TAX POLICY PROCESS (ITPP) (2024)

Issue

After “50 Years of Cutting and Pasting,” Canadian taxation, in general, has become far too complex to understand, administer, and manage. In the present environment, there is a need and an appetite to examine the anatomy of the Canadian taxation system closely to determine best practices and implementation methods. It has also been determined that a study of other countries' existing tax review and implementation systems that are working is worth a look.

Background

One of the core issues experienced by the business community today, which truly understands the need for efficient taxation, is how to determine how best to create a system of taxation that is not only efficient but measurable and in the best interest of all.

Because governments at all levels have made an unprecedented commitment to borrowing money to manage pandemic-related issues, the time is now to implement a new tax policy process to ensure tax efficiency going forward.

Further, Canadians say they want action to simplify Canada’s tax system, according to a Nanos Research public opinion survey on tax commissioned by CPA Canada. Over 81% of Canadians see a comprehensive tax review as a priority for the Federal Government, with more than one in three (35%) saying it should be a high priority.[1]

A base taxation review system has been in place and has been time-tested since 1994. The system, created and implemented in New Zealand, is called The Generic Tax Policy Process (GTPP). It ensures that the tax system remains not only calibrated to the political goals of the party in power but also reflects broader changes the country is going through.

John Cuthbertson, tax leader for Chartered Accountants Australia & New Zealand, says the most salient element of the process is that it’s undertaken “holistically,” meaning that specific changes to the system must account for their impact on the entire tax code, including policies governing charities, retirement savings and the environment. The government has dubbed the exercise “a national conversation on the future of tax.”

It’s an impressively transparent process and offers some important lessons, quite apart from the fact that New Zealanders don’t have to wait half a century to make big fixes to their system. As CPA Canada’s recent position papers on the subject point out, Canada’s system is suffering from a host of shortcomings, including the loss of our corporate tax advantage since the U.S. slashed its rates; uncompetitive personal income tax rates and thresholds; an overreliance on income taxes; and administrative complexity.[2]

“The GTPP improves policy and regulatory outcomes and informs stakeholders in advance of regulatory changes. Submitters will often have better access to empirical information on the size and nature of the policy problem or opportunity. Consultation can also enhance voluntary compliance because it allows taxpayers more time to understand why we need to change, and more time to adjust to changes. There is an added sense of legitimacy and shared ownership if stakeholders have been given a chance to provide input.”[3]

A “Made in Canada” version of this initiative would finally give the people who pay the taxes in our country a say in how and how much the required taxes will be implemented and collected.

THE CHAMBER RECOMMENDS

That the Federal and Provincial Governments:

1. Initiate a task force including all relevant stakeholders to further explore, develop, and implement an efficient taxation system that includes a review of the New Zealand Generic Tax Policy Process (GTTP), as well as other successful models, in the development and implementation of a Made-in-Canada approach to taxation.