Our Economy is Doomed if We Don’t Agree on the Meaning of Three Words
Business leaders across the country believe the nation’s post-COVID economic recovery will be driven by business and significant tax reform is needed to clear the way for this to happen.
Unfortunately, history shows there is a chasm of clarity between what business leaders say and what politicians and policy makers hear.
Groups like the Canadian Chamber of Commerce have long lobbied the government to reform Canada’s tax system. Now, because of the devastating economic impact of COVID 19, everyone is being forced to think differently. That includes the government.
Many have recognized the inefficiencies of our aging tax system. There has been no significant structural reform since the Carter Royal Commission created the system in the 1960s. Instead, the government has indulged in over 50 years of putting yet another coat of paint on an outdated tax machine. The result is a taxation system both the International Monetary Fund and the Organization for Economic Co-operation and Development say is smothering Canada’s economic potential.
The three most harmful characteristics of our tax system are:
- Crushingly complex;
- A hindrance to global competitiveness, and;
- Grossly unfair.
Our post-COVID economic recovery, and the health of our economy for decades to come, is at stake if the tax system does not become simpler, globally competitive, and equitable.
Simpler. Competitive. Equitable.
On the surface, these reform goals may appear to be universally appealing… who wouldn’t want a system that is simpler to administer and comply with? Why not do everything possible to ensure Canada’s global competitiveness? And, who could disagree with making the system equitable for everyone?
This is the “Big If”: If the parties involved cannot agree on the meaning of these three words, tax reform will continue to be contentious, piece meal, ineffective, and frustrating.
Take the word “simpler” as an example.
To business owners, a simpler tax system means a substantial amount of relief from accounting expenses, and more importantly, more time and money. Which translates into more freedom to innovate and accelerate business recovery and growth. And, for some, it may even mean an increased willingness and ability to do their part to close the multi-billion-dollar tax gap.
For employees, it means much the same; a simpler system would decrease accounting expenses, free up their time, and make it easier to comply… doing their share to close the tax gap as well.
Now, for politicians, when they hear “simpler”, they hear “change”. And, naturally when they hear” change”, they also hear “risk”. Advocating and legislating for change is risky; they could win or lose. And, for those politicians who are not pro-business – or do not recognize how critically important every business is to the Canadian economy in normal times, let alone when the country needs to find a path to sustainable recovery – the word “simpler” may even describe a system that is easier to cheat.
And, for the bureaucrats administering the system, some may also think a simpler system is easier to cheat, but many will recognize it could mean less work and job security for them.
Competitive and equitable have as much or more disparity of meaning among the stake holders in the conversation about how tax reform will or won’t fuel Canada’s recovery and future.
What if…
J.K. Galbraith once wrote, “Faced with a choice between changing one’s mind and proving there is no need to do so, almost everyone gets busy with the proof.”
What if instead, all parties involved can cross the chasm of clarity and agree on the meaning of a few simple words? This seemingly basic agreement is perhaps the key that will empower permanent, positive change.
For the sake of the country and all Canadians, I hope we can.
(Keith Brown is a member of the campaign committee driving the Canadian Chamber of Commerce’s efforts to reform Canada’s tax system to ensure inclusive post COVID recovery and growth. He is also the chair of the Conference for Advanced Life Underwriting (CALU), Tax Policy Committee.)