It’s no secret that Canada’s tax system favours corporations over Canadians. Fortunately, research done by Canadians for Tax Fairness, a progressive think tank that advocates for fair and progressive tax policies, has put forward ideas for how our country can make taxation better for everyone and generate more money for social services Canadians rely on.
Here are a few of their proposals for what the government can do to make the country’s taxes more equitable for the many, not just the wealthy few.
1. Restoring the corporate tax rate to the rates that applied in 2019
Corporate income tax rates have fallen sharply over the past two decades, with federal rates falling from 29% down to 15%. This policy has been a total failure. Lower corporate tax rates led to record corporate profits and hundreds of billions in additional corporate cash.
This has also contributed to increased tax avoidance. Increasing corporate taxes by 3 per cent would increase federal revenues by $6 billion. Increasing the small business rate by 2 per cent would generate $1.7 billion annually. Both plans would generate $7.7 billion annually in new tax revenue.
2. Increasing the top income tax rate on incomes over $1 million from 33 per cent to 37 per cent
Trudeau’s government increased the top income tax rate for those with incomes over $200,000 from 29 per cent to 33 per cent. However, this rate is still very low when compared historically.
Increasing the top federal rate to 37 per cent for incomes above $1 million is well-below rates in the 1980s. There are about 25,000 Canadians with incomes over $1 million and they had an average income of about $2 million. An additional 4 per cent tax rate would generate close to $1 billion annually.
3. Leveling the digital playing field
The government should stop giving foreign internet giants advantages over Canadian producers by applying the GST and HST to digital services.
Corporate taxes currently don’t apply to any business conducted in Canada. Any business conducted in Canada should be taxed and the business deductibility for advertising expenses should end.
It’s estimated that this would generate an additional $1 billion annually.
4. Introducing a financial activities tax on compensation and profits of the financial sector
Ten years after the financial crisis, the financial sector still hasn’t paid for the problems it caused. Financial activities were largely exempted when the GST was introduced decades ago.
A Financial Activities Tax would fix this, by applying a tax to the compensation and profits of the financial sector. A rate of 5 per cent would generate over $5 billion annually.
These four strategies alone could generate an additional $14.7 billion annually that could go toward climate initiatives, expanded social services and improving infrastructure across the country.