Simplify taxes to stimulate growth

canada-tax-return

By Alex Whalen

Tax policies are of critical importance to economic growth, prosperity, and wealth creation. The relative burden of tax rates is vital, but so is the complexity of the system itself. With the Federal Income Tax Act totaling some 2,000 pages, and our vast number of interjurisdictional differences, credits, exemptions, and rebates, it is no surprise that the layperson struggles to understand the system.

The Broten Report, commissioned by the Nova Scotia government in 2014 to examine the tax system, underscored the need for a simplification of the tax code at the provincial level. According its authors, tax reform “is a complex topic, because our tax system has become complex. Indeed, most experts—whether academic, advisory, or in government themselves—agree. Tax systems have become too complicated.” And to date, little action has been taken.

Similarly, a recent study from the Conference Board of Canada corroborates this point. Its findings show Canada’s provincial tax regimes to be disparate, both in tax rates and complexity. Nova Scotia, for instance, is consistently ranked as among the highest-taxed jurisdictions.

How can we expect people to have faith in the use of their tax dollars if they have little hope of understanding the system?

Growing the tax base is preferable to raising taxes on existing payers. Therefore, it is imperative for governments to create the proper conditions for growth. Simplifying the tax code is one step that beleaguered Atlantic Provinces can take to gain comparative advantage.

 

Check out our recent policy paper, “I’ll Take New England Any Day!” Authored by Dr. Mark Milke, the report looks at major differences in taxation between the Atlantic Provinces and New England. Read the paper by clicking here.

 

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