September Poll: Canadians are Ready for a Meaningful Tax Reform

With the federal election in full swing, tax changes and promises abound. Last month we asked you what you really thought about one key issue: is this the right time for a meaningful tax reform in Canada? The results are in, and overwhelmingly Canadian advisors are ready for a change as 92.37% said yes. Their comments are worth the read: astute and thoughtful.

Mike said: “It is definitely (past) time for serious and meaningful tax reform.”

Joe agreed with Mike, “Yes the time has arrived actually some time ago. With the extensive and complex changes made to the Income Tax Act since Mr. Trudeau has come to power, this has only made the need more urgent. As a member of CPA Canada’s Small & Medium Practitioners Tax Committee, CPA Canada has already made a submission along with other organizations for this.”

And Bob also pointed to the end goal of a reform, “This is long overdue. Every year CRA adds more collection requirements and more taxes. Reform would be welcomed as long as it makes things financially better for Canadian taxpayers and prepares.”

Doug added, “Meaningful tax reform is way past due.  It has become so complex for some people that it is haunting.  How they process taxes as well needs to be reformed.  CRA is so far off track now, that they can never get caught up.”

And Bruce made note of some added benefits that could come from tax reform: “Tax reform is past due by about 20 years. A simple flat tax formula would make life easier for all taxpayers. It would make the government’s job easy and they could save money by reducing staff at CRA. How about flat 25% on the first $100,000 dollars of income and 30% on all income over the 100k mark. No deductions required. No bookkeeping and no fighting with revenue Canada on what deduction is allowed or not. So simple! So efficient. Everybody pays, no exceptions.  Change the welfare system to a minimum weekly wage and take 25% tax off it.“

Martin brought attention back to Tax Freedom Day, “Any time is the right time for a ‘meaningful’ tax reform.  But it’s not likely to happen.  Canadians are some of the most highly taxed people in the world. Tax Freedom Day, for 2019, in the US is April 16th, while in Canada it is June 14th, two months, or 56% longer, or 56% more tax. I’ve heard the argument that there are fewer people in Canada to pay for the services.  There also fewer people to provide those services to, so that argument loses at least some validity. There is significant differences between provinces and territories.

There is talk of removing the more attractive tax rates on capital gains and dividends. That would also remove the incentive to invest n Canadian companies. If you earn income from outside your province or Canada, and bring it into Canada and your province where it will contribute to, and help stimulate, the Canadian economy, the government of Canada charges you a 3% surtax. A bit counterintuitive.

The Canadian tax system is complicated, difficult to obtain answers on, and continually changing as the government finds more things to tax, or ways to get more tax out of existing categories. Maybe it is time to go to a flat rate, of say 15%, so the more you make, the more you pay. No deduction, so the wealthy would pay their fair share. People with very low incomes would pay a small amount on their earned income, but receipt of government benefits would be non-taxable, up to a certain level of income where they would no longer be considered eligible for those benefits.

So, yes, meaningful and fair tax reform is long past due. Meaningful being the operative word.”

Much of people’s concerns seemed to stem from the complexity of the Canadian tax system. Marie said, “We have an incredibly complex tax system that becomes more confusing and frustrating annually, not only to common people but to the accounting gurus of our country. Surely there is waste in that!”

“It is not only a complex mess from the point of view of the taxpayer, but so many little traps that can catch even experienced tax preparers,” said another respondent.

Kristal agreed and made note that, “The fact that people are too scared to file their own taxes should say something in itself.”

And Daniel said: “If you build a small house, and every year build an addition on it - perhaps an extra room, or a deck, or an extra storey, or perhaps convert the deck to an enclosed porch, etc.  After 100 years, the house will be nothing but a conglomeration of piecemeal additions.  It will not have nearly the integrity or efficiency of a house that was built right in the first place.  However, that is what our Canadian tax system is.  It needs to be razed and rebuilt.”

A few of our respondents disagreed, and here’s why they felt now was not the time for tax reform:

“I’m saying NO,” said Alan. “Not because it doesn’t need to be done but simply because we do not have - or appear to have a prospect of having - a Government that I feel is capable of dealing with the subject. CRA cannot deal with what we have now, how are they going to deal with major tax reform?”

And Nelson added, “I don’t think there is any 'right time' for tax reform.  No matter what is 'reformed', there will always be a significant number of Canadians (like me) who are intelligent enough to make it work, and help others do the same.” 

Liza expressed similar concerns, “This country needs to get its priorities straight. I would like to know what meaningful tax change means. I don’t think that what has been done so far is meaningful unless its to abolish the middle class. I would rather see a politician make no more than an average Canadian and also pay for their own retirement like the rest of us.”

A few suggestions came out of the conversation. Denzil suggested meaningful tax reform could come from “Academic review from universities or Think Tank not a one party review. . . . Or a few retired finance ministers.”

Concern over current politics and the election campaign were expressed by Peter, “Yes, it is unfortunate that we are not debating this issue in the election campaign - instead of trivial issues like bringing back the fitness and arts credits!”

And Ron added, “Soon though…  Let’s just wait and see what happens with the federal election. If the Liberals are back in then definitely NOT! The last thing this country needs is more taxes with bigger loopholes for the ultra-wealthy.”

Veronique expressed her concerns and opinion on political leadership and the impact they have on the tax system, “Surely not with liberals! This government is not suited to deal with it in the best way for the country! Let’s first get conservatives in as they tend to have business background and appropriate education!”

Some suggestions came out of the discussion. Mark thinks “Retirees pension income should be tax-free.”

And Kevin added to that, “CPP Disability benefits should be tax-exempt. $1200.00 per month (before taxes) cannot sustain a disabled person in this economy. Trudeau and his Carbon scam need to go. My cost for groceries has risen overnight by at least 30%. My rent is more than 2/3 of my net income, + utilities. I cannot afford to walk out my front door. I had been a taxpayer from 1971 to 2015 when I became disabled. This is reprehensible.”

While Holly said she’d like to see “all income taxed; WSIB, status employment, Child tax benefits, welfare, support payments, capital gains, inheritances: from the first dollar. Then give credits to the most vulnerable sectors of society.”

And some reasoning for why tax reform is needed was pointed out by Lorne, “Our country is burdened heavily with taxes from gas, to HST and income tax. It is hamstringing our country from growth that we should be experiencing. Also interest rates are so low that baby boomers can’t afford to spend thereby also slowing our business growth.”

And Gale said, “Hell yes!! This is so scary for mid-class people they don’t qualify for benefits because income too high but need benefits because that high income is too low.  It’s a never-ending circle.  We need help now!”

Is Gerry right when he said, “Time to simplify the tax code”? Daniel seemed to think so and invoked a smile from the KBR editorial team: “Meaningful tax reform needs to happen everywhere.  It’s a taxing issue.”

This month we’re talking about Tax on Split Income. “In your view, should the government roll back the controversial TOSI (Tax on Split Income) to pre-2018 legislation?” Let us know. Cast your vote and tell us your thoughts on the matter.

Additional Educational Resources: Join us at CE Summits this November where we’ll cover year-end tax planning. Register before October 15^th to take advantage of early-bird pricing.

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