At a time when Canada, like every other country, is in search of highly expert staff, our tax rates make it difficult for them to decide on to work here. This applies equally to Canadian residents and potential latest immigrants. Anecdotally, I’m hearing increasingly from clients and folks in my network that their children who’ve chosen to review abroad usually are not returning home because they’ll earn and keep a bigger portion of their income elsewhere. I’m not surprised.
Our high tax rates also make it difficult to draw investment to our country and expand existing businesses. This is crucial to extend productivity, innovate, create jobs and compete with competitors in countries with lower tax rates.
The Allan Small Financial Show, featuring three tax experts – Fred O’Riordan of Ernst & Young, Jake Fuss of the Fraser Institute and Tim Cestnick, a Globe and Mail tax columnist and CEO of Our Family Office – originally aired on September 18, 2024.
Let’s examine a flat tax
As a rustic, we’d like a greater, more thoughtful tax strategy – one which is fair for everybody. Canada has not taken an in depth, comprehensive have a look at our tax system since 1962, when Prime Minister John Diefenbaker appointed the tax system Royal Tax Commission.
At least it will be a chance to streamline what I consider to be a really complicated system. At best, it will probably show a greater way forward. One possible approach to streamline our tax system and make it more efficient and fair is to introduce a uniform tax rate across the board. This is just not a brand new tax concept.
In the last decade Estonia has reaped the rewards of probably the most competitive, easy and transparent solution Tax system within the OECD. The tax rate for people and firms is 20%. In 2025 it’s planned to extend to 22% to match the consumption tax, which was increased from 20% to 22% in 2024. For natural individuals, the tax rate doesn’t apply to dividend income; and firms only pay taxes on distributed profits.
The result: The country has been very successful in attracting startups and investments.
And we haven’t got to depart Canada to see an example of a flat tax. From 2001 to 2014, Alberta had a uniform income tax rate of 10% for people and businesses, referred to as the Alberta tax profit. The Fraser Institute is now calling for Alberta to introduce a good lower flat tax of 8% on personal and business income to draw people, businesses and investment to the province and encourage spending. When Canadians pay less taxes, they’ll spend more and put it back into the Canadian economy.
Another possible approach to ensure tax fairness and generate revenue to satisfy government tasks is to create more opportunities for collaboration between the general public, business and government. For example, why don’t we give individuals and firms the chance to take a position in infrastructure projects like latest roads and highways and earn a return over time?
