Report Reveals Canadian Tax Burden Virtually Unchanged

by Mike Godfrey, Tax-News.com, Washington

26 February 2002

According to a new report from Canadian economic forecaster DRI-WEFA, the Canadian tax burden has remained virtually unchanged over the last seven years, despite much-trumpeted tax cut programs by both the federal and provincial governments.

The study, entitled 'The Tax Burden and the Debt Burden: How are we doing?' found that in 1996, the total tax take accounted for 41.1% of GDP. Today, total Government revenues from taxation amount to 40.1% of GDP.

'It will be disappointing to many Canadians to learn that the total tax burden has not fallen all that much,' observed Dale Orr, Managing Director of DRI-WEFA.

The report also revealed that Canadian taxpayers pay more in interest payments on a public debt that is relatively larger than that of the United States, which increases their comparative tax burden.

'Today, the Canadian taxpayer is paying for services rendered to people in earlier years,' Mr Orr explained, pointing to the fact that approximately one third of the total tax burden is earmarked for interest repayments on public debt. 'We did not pay for the high level of Government services provided from the mid-1980s to the mid-1990s. That is why taxes are...so much higher in Canada than they are in the US.'

The report also suggested that the country's high tax burden and national debt could be behind the slide of the Canadian dollar and the recent decline in foreign investment, as potential investors may view a high level of national debt as the source of potential future taxes, and a brake on future infrastructure spending.

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