Canadian Government Urged To Cut Back On Income Taxes

by Mike Godfrey, Tax-News.com, Washington

14 October 2002

The Canadian federal government has been urged to shift the tax mix away from income taxes and towards consumption taxes such as the GST.

Representatives from Canada's business, labour, and academic communities attended TD Forum on Canada's Standard of Living, a one-day event held last week. In a statement released on Wednesday, the Forum participants suggested that: 'consideration should be given to shifting the mix away from taxes on income, savings, and capital, toward taxes on consumption.'

This was just one of eighteen recommendations designed to improve Canada's economic situation, and to raise the country's standard of living to a level surpassing that of the United States within fifteen years. However, a proviso was added to the effect that:

'To avoid such a shift being regressive, changes to the structure of personal income taxes would be required.'

Speaking to the Canadian National Post following the publication of the communique, conference participant and president of the CD Howe Institute, Jack Mintz explained that income taxes and corporate taxes remove or distort incentives for people to save and invest, whereas consumption taxes are more neutral:

'You move from taking taxes off savings and investment. So you would reduce personal and corporate income tax...and you can potentially get some sharp increases in growth (GDP) as a result of changing the tax mix...The reason for that is investment is absolutely critical for economic growth.'

However, not everyone is agreed with regard to the supposed neutrality of the GST. Also speaking to the National Post last week, Charles Penson, Canadian Alliance finance critic observed that the consumption tax is so hated in Canada that it is almost impossible to debate tax policy in a rational manner:

'Canadians need to see some lowering of personal income tax levels. I think people are so over-taxed in this country that they are not in a mood to discuss what might be the fairest tax...before you can have any rational discussion with the public I think there has to be some recognition that tax levels need to go down,' he suggested.

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