One Comment About Taxation –Tax Reform is Much More Than Tax Rate Reductions or Surgical Fixes

 

Do you have a 1972 Chevrolet half-ton sitting in your driveway? Or a 1987 Ford Tempo? Or how about a 1999 Toyota Corolla? If you have those vehicles and still drive them regularly, they’re likely not efficient and require a significant amount of upkeep. 

 

Those years of vehicles represent the last time Canada had meaningful or significant tax reform that made life better for Canadians. Yes, our tax statute and administrative system is that old and long overdue for a tune-up. Better yet, an overhaul.

 

Canadians should be tired of driving an old vehicle that is a gas guzzling lemon. Regular readers will know that I’m passionate about the need for tax reform in Canada. But what does tax reform mean?

 

When I talk to non-tax professionals, many are confused about what it means. Some think it’s simple tax rate reductions. One reader reached out to me recently and stated that the current government had engaged in tax reform by reducing the lowest tax bracket by 1% from 15% to 14%. Sorry, that simple rate reduction is meaningless for most Canadians – about $110 of average annual savings per person – and poor politics. Nothing more.

 

With some of my tax peers, tax reform means taking a surgical approach to the Income Tax Act to clean up some of the obvious messes. There is no shortage of provisions in the statute that need cleaning up. For example, the prohibition on deductions on short-term rentals for certain owners is one of the most offensive pieces of legislation that I have ever experienced in my career. When criminal drug dealers – who are allowed to deduct their business expenses if they report their income – are treated more favorably under the Income Tax Act than entrepreneurial short-term rental owners, you know the system is in dire need of repair.

 

Further, I recently attended a tax conference where one of the agenda items was a session on tax reform. Some excellent tax practitioners walked through a list of tax provisions that need fixing, amending or deletion. With respect, tax reform is much more than simple surgical technical fixes.

 

For some academics, mention tax reform and they’ll often pull out the shallow comment of “be careful what you wish for; tax reform might just be tax increases given the need for increased tax revenues”. This one always irks me. Why? Because good tax reform should involve much more than looking for ways for government to increase revenues.

 

So, what is tax reform to me? Well, it’s a litany of things. But it’s bound together by some common objectives:

• reduced complexity;
• more approachable to the average Canadian;
• a tax system that incentivizes risk-taking and investment; and
• encourages successful Canadians to stay in Canada.

 

Good tax policy – and thus tax reform – can greatly impact all of the above and it should act as a magnet rather than the repellant that it currently is.

 

Jack Mintz has long called for “Big Bang” tax reforms. Such ideas go well beyond surgical fixes and simple tax rate adjustments. For example, “big bang” corporate tax reform could encompass a “made in Canada” version of the very successful corporate distribution tax that Estonia has. Such a model involves a blanket deferral of corporate tax for Estonia corporations’ profits to the extent such profits are reinvested back in the company. With some Canadian adjustments, this could be a very powerful economic incentive for Canadian entrepreneurs and businesses to invest in Canada.

 

However, when this idea is raised with some in the tax community, there are often many naysayers who have plenty of reasons why this idea won’t work. I’m obviously not a fan of that commentary. Instead, I think of the ambition of some of our country’s builders who thought big. Can you imagine the naysayers who must have thought the building of our country’s national railway was impossible? The 1885 ceremony of The Last Spike must have been a gratifying moment for such an ambitious achievement despite the naysayers.

 

The same type of naysayers existed when the eventual forefathers of Canada started dreaming about the Dominion of Canada which culminated into our great country on July 1, 1867 with the eminent Sir John A. MacDonald being our country’s first Prime Minister.

 

Successful tax reform requires big thinking but it also includes an appropriate process. The last time significant review occurred was The Royal Commission on Taxation which took four years – from 1962-1966 – to review and eventually release its Report and recommendations. Should we do that again? Well, I’m an idealist and would love to do that.  But I’m also a realist.  And given the political environment, it’s not realistic.

 

Instead, a short-term task force – like that proposed by the Conservatives before the last election campaign – is more realistic. Although the Liberals proposed “an expert review of the corporate tax system” during the last election campaign, it did not appear in the recent budget. Not surprising. The Liberals appear to have no political desire to engage in meaningful tax reform.

 

So, where does all of this leave us?

 

A tax system that actively repels investment, punishes success, and buries Canadians in needless complexity. Combine that with a group of voters and politicians who think ballooning deficits, plummeting productivity, and capital flight are somehow acceptable.

 

Tax reform is about building a system that works – for taxpayers, for entrepreneurs, and for the long-term health of the country. Reform done right is ambitious. It’s responsible. And it’s long overdue.

 

As Winston Churchill once said, “To improve is to change; to be perfect is to change often.” Canada hasn’t meaningfully changed its tax system in over 50 years. That’s not perfection – that’s neglect.

 

If you’re still clinging to a 1972 Chevrolet half-ton as your daily ride, I admire your stubbornness – but I wouldn’t recommend it. And I sure as hell wouldn’t use it as the blueprint for Canada’s economic future.

 

It’s time to trade it in.

 

One Comment About Leadership – Leaders, Your Words Matter

 

Last week, I listened to a compelling sermon. The pastor shared a powerful story about a father who worked long hours, often returning to work after dinner, trying to ensure his son would have the means to attend post-secondary school. His absence, however, came at a cost.

 

One evening, the father noticed something was off with his teenaged son. “What’s bothering you, Son?” he asked. The response cut deep: “You don’t care…you’re never home anyway.”

 

Shocked, the father walked out of the room, wounded. Later that evening, the mother explained to the boy how much those words hurt his dad. The son felt terrible and apologized.

 

But as the pastor said, “Words matter.” That moment stuck with the father for the rest of his life. He forgave his son, but the sting of those words couldn’t be undone. Apologies are nice – but they don’t erase what’s been said.

 

Leaders, have you ever regretted something you’ve said? I know I have. Practicing restraint – especially in moments of stress or frustration – can be one of the most powerful leadership tools you develop.

 

We all want to be remembered as leaders who inspired, not as ones who wounded carelessly. Your words, intentional or not, have weight. Use them wisely.

 

One Comment About Economics / Politics – Premier Danielle Smith of Alberta is Defending The Memorandum of Understanding Between the Federal Government of Canada and the Province of Alberta

 

Premier Danielle Smith has been cheerleading the recent MOU between the Federal government and Alberta to develop Alberta’s natural resources. I say good for her! I love her energy, leadership and optimism. In a recent op-ed published in the Financial Post, she even had good things to say about our illustrious PM Carney. Again, good for her…she is certainly more kind than me!

 

The op-ed, however, does not address one of the biggest issues that lies ahead. Given the commitments to carbon pricing, any investment made by private investors will need to consider as much as $10/barrel in extra costs that will be imposed to producers. This has the potential to make our products less competitive given the fact that, as Jack Mintz points out, only Canada, Norway and the U.K. saddle their producers with this slate of carbon policy costs.

 

Much of the media has been focusing on the extremes: constantly cheerleading the MOU or pointing out all of the extremist opposition. This is one of the reasons I tend to avoid the so-called MSM. In their constant quest for eyeballs, they give extremes a platform whereas it’s my view that most people want pragmatic views and balance.

 

Last week, I attended a conference where the opening speaker walked the audience through the details of the MOU and some of the challenges ahead. It was an excellent and balanced presentation. There was a question-and-answer period, so I asked the speaker about Jack Mintz’s carbon pricing concerns. She acknowledged that such concerns are real and valid with no easy answers.

 

Let’s hope that all of the challenges that the MOU presents can be worked through for the benefit of ALL Canadians

 

Bonus Comment – Quote Often Attributed to the Greek Philosopher – Epictetus – About Speaking

 

“We have two ears and one mouth so that we can listen twice as much as we speak.”

 

Absolutely agree! Leaders, this is a timeless reminder. Leaders who speak without listening are often remembered for the damage they cause – not the wisdom they share. Practicing restraint is simply good discipline.

 

Hope you enjoyed this edition of 1-1-1. If you’re not already part of the In the Mood Network, now’s the time. Please sign-up today.  Whether it’s through consulting, coaching, speaking, or writing, my work is about planting acorns: deliberate, principled actions that challenge the status quo and grow into something far bigger. The goal? Bold reform. Stronger foundations. And a country that values hard work and common sense.