Tax & Financial Pros Weigh in on Effective Economic Reform

Beth Graddon

This doesn’t happen very often, but the result of our January Poll question which asked: “Do you think personal/corporate tax reforms can spur economic growth in Canada in 2022 and beyond?” were split right down the middle with 50% saying “yes” and 50% saying “no”. Why the mixed results from Canadian tax and financial professionals? Here’s what you had to say:

Here’s why half of our participants said “no”…and had the most to say!

“Tax changes can make a difference, but only over time.  These are not a "fix" that will cause an immediate response from consumers of businesses. Life is lived day-to-day. Most people see tax as an annual task to meet and understand the impact of tax changes when they are explained to them by their tax preparer or advisor.” - Sandra Gibbs

“Not under the current Government leadership” – Robert Kelley

“We need the top income earners to pay much more tax to eliminate the COVID debt.  At the same time we need to make changes so seniors who have RIFs do not experience forced withdrawals and the subsequent taxes.  Otherwise in their oldest years when they may need the most support services and equipment there will be no money left.”  – Marilyn Kenny

“In my opinion no matter how much money we will try to save by cutting our throats or starvation there will be more and more government spending to absorb.  This is not the way to address this issue.  As some other people said, this is too deep political issue.  One does not have to have degree in economics to see this.” – Krystyna Klepinska

“Lower the personal tax all around--look at other countries with a lower personal tax and they do well because small and big businesses spend their money more wisely than all governments spending.  We have mass spending by the Federal government with no accountability--what good has it done or where did it go?”  - Leanor Davidson

“No, because it would be a terrible mistake for the federal government to even think of burdening taxpayers and corporations with tax increases during the pandemic.  Instead, to increase tax revenues the government should cut back on subsidies for certain medium and large corporations; create a "special tax" on real estate investments, the housing market, and internet sales.”  – Trevor Hitchman

“If you want to spur economic growth you need to increase the spending power of individuals, not as an annual adjustment.  A first step to show intent should be to ensure the ultra-wealthy are paying their fair share of the tax burden.  Once this is done then maybe reform could be done which always seems to always at the detriment of the lower taxpayers.  The tax system must be fair with all parties paying their share (not just the ones that can't take advantage of loopholes or have lobbying power).” – Nancy Campbell

“Small business is the engine that keeps the economy going in nearly all communities across Canada. In Ontario, for example, a person earning annual income of $15,851 pays combined Federal & Provincial tax rates of 25.1% whereas one earning $20,822 annually pays a combined income tax rate of 20.05%. In what world of economics does it make sense for the lower income earner to pay more taxes than the higher income earner? If the federal and provincial governments want to truly help minimum wage earners who would fall into this pay grade, then lowering the income tax rate would ultimately put more NET take home pay into these Canadians wallets. The increase for minimum wage also could be sustained for longer periods for SMB's providing inflation doesn't continue to rise at such a rapid pace as we've seen throughout COVID. There has been little help to SMB's who don't qualify for pandemic relief.” – Nancy Grant-Scott

"Tax Reform," especially with a Liberal government and more especially with this Liberal government, just means increased taxes all round. This government has proved that it will waste any amount of money it can extort out of anyone, mostly to help the Prime Minister's personal life and agenda. So, the answer has to be a definite 'no', looking at the excuse we have for a government.   – Mitzi Lynne Morgan

“Most of these are politically motivated and not necessarily for economic recovery.  I am from Alberta; therefore, very confined (sp) that if the Government was serious up economic recovery, they would get oil flowing while we still can provide to benefit the whole country while we look to what we can do in the future.  Our resources will give us the economy to do the future planning but right now our Government is preventing Canada from benefitting for our natural resources while we can.  The United States and other Governments take care of themselves but not us.”  – Bill M

“I don't think anyone considering tax reforms thinks about what would spur economic recovery.  When politicians and bureaucrats are involved, they put out things that feed their pet projects (like the appliance repair tax credit as example in the Liberal party's election platform).  Another program for childcare only helps those with children of a certain age.” – Derek T

“Small business is the economic engine of this country.  Relief for their burden (whether taxes or red tape) would help.  The other alternative is to offer something that would help all citizens. Doing that implies raising the personal exemption or lowering lowest tax rate.  That is only a real impact that gets adjusted annually.  For more immediate relief it involves tinkering, which typically adds more complexity and bureaucracy, which ultimately costs more in taxes longer term.” – Derek T

And a couple of comments from those who said “yes”

“Depends on the reforms.  If done correctly in a constructive manner, they can help facilitate economic growth. If done in a punitive way with no view of anything other than what they think people might like, the reforms will probably do more to hinder than help. The present government is more inclined to do the latter than the former.” – Robert Litschel

“True reform sure it would be welcomed to simplify our tax act. "Reform" to shift tax burden even more to the industrious among us, raise taxes generally, or if accompanied with no spending curbs, is not welcomed.” – Terry

Thanks to everyone who participated. Please weigh in on this month’s poll question: “Are you noticing an increase in CRA audit activity?”

Additional educational resources: Don’t miss this opportunity to take Canada’s most up-to-date and comprehensive Advanced T1 Tax Update Course for Professional Tax Accounting firms and their new and returning staff who will file 2021 T1 Returns. This is Canada’s #1 tax training program for busy practice owners who need to recruit and train staff in time for this tax season.