One Comment About Taxation – What Does a 21st Century Tax Reform Look Like For Canada?

 

Over the years, many tax practitioners, including me, have called for tax reform. But when such rallying cries fall on the ears of the average Canadian, I’ve grown to realize that it doesn’t really resonate. It should.

 

For many politicians, tax reform generally means appeasing their voter base with new tax measures that are generally shallow in substance and often miss the mark from a good policy perspective.

 

Take the recent 1% reduction of the lowest personal tax bracket as an example. Is it a good reduction?  Sure.  But is it a comprehensive answer to our country’s tax issues?  Hardly. And will it be meaningful to the average Canadian?  Nope.  While the reduction will cost our government significant funds overall, the maximum savings for an individual for 2025 will be $210 and $420 in 2026.  Not needle-moving for most.  And is this tax reform?  No, not in the least.  Unfortunately, many politicians think it is.  Instead, it’s sugar-laced political candy – superficial, short-term and lacking serious thought.

 

Consider another example, housing.  Politicians, especially the Liberal Party, love to attack bogeymen in trying to appease their voter base.  The underused housing tax (non-Canadians), “flipping tax” (those damn “flippers”), the prohibition of deductions on certain short-term rentals (“STRs shouldn’t be in my neighbourhood!”), the proposed tax on unused residential land (it’s as simple as developing zoned land…yeah, right) and even the prohibition of non-Canadians from purchasing Canadian real estate (not a tax measure but it has negative implications) are all examples of recent poorly thought out taxation policies that have had minimal implications in improving housing supply. And most definitely not tax reform.

 

Even some of Canada’s municipalities have jumped on the housing bogeyman bandwagon and introduced forms of vacancy taxes (Vancouver, Toronto and even Canmore who is introducing a “livability tax” that Jack Mintz recently commented on).  Are these measures tax reform?  Nope.  Instead, it’s bogeyman politics and poor policy.

 

Many tax practitioners have strong opinions on what needs to change.  Often, however, such comments are about “surgical fixes” rather than looking at the big picture and figuring out what’s working, what’s not and thinking about bold ideas.

 

As a reminder, the personal income tax was first introduced in Canada in 1917.  A corporate tax morphed into existence around that time as well.  In 1962, PM John Diefenbaker convened the first Royal Commission on Taxation.  The committee members took four years to review and make its voluminous recommendations.  Many of the recommendations have aged nicely.  Some were controversial – like the taxation of capital gains that were previously not taxable.  Finance Minister Benson responded to the recommendations in his famous White Paper in 1969 culminating in major tax reform in 1972 – including a compromise on the taxation of capital gains (being only ½ taxable instead of fully taxable as recommended by the Commission).

 

Since that time, there has been some limited tax reform / review – such as the 1987 change of many tax deductions into tax credits and the 1999 Mintz Committee on Business Taxation which led to some changes – but nothing comprehensive.  Instead, we have had many “surgical fixes” (often motivated by perceived abuses) and no shortage of bogeyman political measures.  Combine the patchwork quilt approach with a bloated administration that is the Canada Revenue Agency and the system is a mess.

 

So, what does a good tax reform review look like to develop a 21st century tax system for Canada?  Well, first off, it’s thorough, not the political cherry-picking of voter-friendly poor policies.

 

Second, the review starts by reminding Canadians what a good tax system looks like. It is well accepted that Adam Smith’s four canons of a good tax system (that he laid out in his landmark 1776 treatise The Wealth of Nations) are good principles for a country to strive towards: 1. Equity / Fairness – but not the definitions that many politicians like to adopt; 2. Certainty; 3. Convenience; and 4. Efficient (economy in collection). This exercise alone would no doubt reveal that Canada has strayed mightily from those core principles.

 

Third, it would require bold thinking. As mentioned, surgical fixes are not the solution. Instead, the tax system needs new and bold thinking – or as Jack Mintz likes to say, Big Bang tax reform – to deliver overall economic benefits that Canada needs.  These big ideas should generate direct or indirect benefits for all.  Ideas that punish one group of Canadians to the exclusion of others should generally be off the table unless there are compelling reasons why it should be so.

 

Fourth, it would require courage by political leaders to undertake such an important exercise.  Such courage has been in short supply over the last number of years by politicians around the world and especially our Canadian governing party.

 

So that leads me back to opening comment: why should the average Canadian care about tax reform?  Because taxes are not just about the money you pay on your paycheck.  Instead, taxes are one of the most powerful levers affecting your ability to build and preserve wealth.  A reformed tax system should not only be fair, efficient and growth oriented, it must also be resilient to help with that wealth building / preservation.

 

Canada’s current system is a patchwork quilt of a mess not able to withstand the shocks that our country is facing with recent examples being U.S. tariff threats, rising global tax competition and retaliatory proposals like section 899 of the U.S.’s Big Beautiful Bill.  Without bold, principled reform, Canadians will continue to bear the cost of short-term political thinking while long-term prosperity fades.

 

The 18th-century political philosopher, Edmund Burke, once wrote that society is a partnership between those who are living, those who are dead, and those who are to be born.  I agree.  That partnership is betrayed when we allow tax policy to drift into incoherence and incomprehensible complexity.  We need to work hard to preserve a system worthy of future generations.

 

One Comment About Leadership – Leaders, You’re Not Always The Smartest In The Room

 

Ever worked with a leader who thinks they’re always the smartest person in the room? I have. And I keep seeing it across boardrooms, government podiums, and everywhere in between.

 

How do you spot one? Two obvious giveaways.

 

First, they never stop educating. No matter the topic, they’re the expert or so they think. You share an experience, and they immediately one-up you. Or they’ll tell you “how things work”.  Apparently, they’ve done it all, seen it all, and now you’re lucky enough to hear about it.

 

Second, they just won’t shut up. Ask a simple question and brace yourself for a rambling monologue full of jargon, tangents, and vague references. By the end, you’re not enlightened, you’re confused.

 

I call the above two attributes “confusion by allusion.”

 

These aren’t quirks. They’re credibility killers.

 

Real leaders get it: they’re not the smartest in every room. And they don’t need to be. Their job is to pull out the best ideas and tactics from those around them. As Dale Carnegie hammered home: listen. Not the performative kind. Actually listen. Ask. Invite. Learn.

 

You don’t build respect by pretending to know it all. You build trust by being honest when you don’t and by showing confidence in the team around you.

 

Leadership isn’t about dazzling with intellect. It’s about creating trust and the conditions for real ideas. Not ego trips to win.

 

Leaders, don’t create confusion by allusion. If your goal is to sound smart while making others feel small, well, congrats, you’re not leading. You’re just performing.

 

One Comment About Economics – Will Canada Ever Be Able To Get Big Projects Done?

 

Over the last 10 years, Canada has struggled mightily to get big projects done.  And for those that are in the camp of “the federal government got TransMountain built”, well spare me your shallow take.  Such a project would have easily been completed by the private sector had the government not created the environment where the risks far exceeded the expected returns.  Add on various statutory amendments that continue to make pipelines, for example, a very risky venture for private venture (since it likely won’t be approved under the current environment) and our country is in a precarious position.  New PM Mark Carney is talking a big game about making it much easier to get stuff done and recently introduced Bill C-5 which does have some promise about a proposed new approach to government approval for such projects.

 

Gary Mar, a former politician and current CEO of the Canada West Foundation recently wrote about Bill C-5 in an op-ed piece in the Financial Post.  Some of Mr. Mar’s concluding comments are as follows:

 

This is a chance to show Canada can still build great things — responsibly, quickly and with everyone at the table. The question is whether governments are ready to put partnership ahead of politics.

 

Because if we get this right, we won’t just be building pipelines, transmission lines, ports and corridors. We’ll be building trust, economic growth and the kind of country that gets things done.

 

In the West, we’re ready — because when the West leads, Canada thrives.

 

I agree.

 

Bonus Comment – Quote From Management Guru – Peter Drucker – About the Importance of Listening and Looking For Cues

 
“The most important thing in communication is hearing what isn’t said.”

 

Absolutely agree! Leaders, listening is one of the most important attributes of being a leader!  Practicing is important.

 

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.