By: Florence Marino B.A., LL.B., TEP | Vice President, Tax & Estate Planning
The Federal budget is coming down next week. The government received about 1000 submissions during the pre-2025 Budget consultation that closed at the end of August. Is tax reform on the horizon?
Tax Policy Symposium
On October 3, at the Canadian Tax Foundation Tax Policy Symposium, a full day was devoted to discussing the process of tax policy formulation in Canada and at least some of the time was spent discussing the way forward. A fair amount of time was spent on how much voice and input the expert/tax community should have in framing tax policy, how to incorporate and reflect the voices of think-tanks and academics in the process, and, how the political sphere can shape the measures that are introduced notwithstanding.
The most interesting session was the last one of the day since it focused mainly on the way forward – with the general idea that “tax reform” could be possible. There seemed to be general agreement that the Income Tax Act is too complex, compliance is too burdensome, administration is too costly and tax reform could address this. But the attendees and panelists were mainly in the tax expert category who know it and see it every day. A very different crowd from the average person on the street or even the politicians representing them.
Is there political alignment right now?
In its election platform the Liberals undertook to “conduct an expert review of the corporate tax system based on the principles of fairness, transparency, simplicity, sustainability, and competitiveness.” The Conservatives promised to stand up a tax reform task force within 60 days of being elected. An optimist could possibly see some alignment there.
There certainly is alignment amongst tax professionals. Many in the tax community have been calling for comprehensive tax reform. A recent example comes from CPA Ontario (https://www.cpaontario.ca/insights/thought-leadership/tax-reform-for-growth-in-canada) which, in addition to making specific and broad substantive recommendations called for establishing a Royal Commission “to identify what is and is not working,… encourage discussion and debate, and… develop bold, forward looking options for structural change.”
A challenge – “Revenue mobilization”
When reading OECD Tax Policy Reforms 2025 (https://www.oecd.org/en/publications/tax-policy-reforms-2025_de648d27-en/full-report.html) this euphemism – “revenue mobilization” – was used to describe the various tax increases undertaken by governments around the world in 2024. The report summarized:
“High levels of debt coupled with significant emerging spending needs relating to climate change, ageing and, in some countries, increased defence spending, has meant that jurisdictions of all income levels have adopted strategies to mobilise more revenues. Some have opted to raise standard value added tax (VAT), corporate income taxes (CIT), or personal income tax (PIT) rates, as well as health and environmentally related taxes. Others have pursued more targeted approaches to increase tax revenues, including the introduction of temporary or permanent excess profits taxes or surtaxes. These measures vary in scope, with some countries levying them on specific sectors, highly profitable firms, or directly on excess profits themselves.”
Sound familiar? As we’ve previously expressed, the other shoe has to eventually drop (Wealth and tax – Some developments from around the world – Tompkins Insurance).
Alternative ways of thinking
Focusing on growth, competitiveness and productivity is not inconsistent with tax reform. Tax reform could be a tool in strengthening our economy. The main message from the last panel at the Tax Policy Symposium was that the best way to bring about tax reform is to focus on what it could do, the problems it can solve and the results it can deliver. And importantly, to link those solutions with the issues, concerns and fears that everyday Canadians are experiencing.
What will November 4 bring?
Tax reform will not happen in this or any budget. We will only see signals or directional indicators. We anticipate that the commitment to do an expert review of the corporate tax system will be carried through on. It could be a logical starting point and could connect to larger economic goals expressed by the government. But, what we fear is the pressing need for “revenue mobilization” which could drive this review in the wrong direction.
FOOTNOTE:
This publication is protected by copyright. Tompkins Insurance is not engaged in rendering tax or legal advice. TOMPKINSights contains a general discussion of certain tax and legal developments and should not be construed as tax or legal advice.
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florence@tompkinsinsurance.com
