One Comment About Taxation – The Proliferation of Artificial Intelligence Is An Opportunity to Think Big About Our Country’s Tax System

 

In November 2022, I was having dinner with three of my best friends when one of them pulled out his phone to show us the just released ChatGPT, the new large language model artificial intelligence application.  It was amazing.  All of our jaws dropped.  “And this is just the beginning,” our friend said.  Over 2.5 years later, he was bang on. The rapid pace of AI applications is truly astonishing.

 

Since that day, I have been very interested in how AI can help me become more efficient in my work. And it has. From accessing quick answers to difficult questions, using it as a search engine replacement and coming up with ideas has been game changing.  In the professional realm, I routinely use AI applications like Ask Blue J, a revolutionary AI tool to help with my tax research.  ChatGPT, Ask Blue J and others have transformed how I conduct tax research.  And they’re very good overall on the accuracy scale.  Not perfect but very good.

 

I often get asked if AI will replace tax advisors like me.  My usual answer is a qualified “no”.  AI has, to date, made my job more efficient but experience and empathy still count for something.  I do believe, however, that we’re not very far away from AI replacing human beings with repetitive tasks like bookkeeping and preparation of financial statements.  Ditto for tax administration.  It is conceivable that a lot of the assessment functions, audits, reassessments, collection matters and other routine functions of the Canada Revenue Agency could be replaced by AI at some point soon. Yes, I’m aware of the data risks.

 

From an overall jobs perspective, as in the tax realm, AI will likely replace repetitive jobs. For example, have you seen Tesla’s Optimus robots that are in the testing phase? Truly amazing technology. Will the job losses triggered by AI result in a shifting of jobs to where human beings are truly needed (like personal or health care) rather than a permanent loss?  Of course, the pace and permanence of these losses remain unknown but economic history leans toward reallocation over obliteration.

 

What does the proliferation of AI mean from a tax policy perspective for our country?  Well, like most countries, Canada relies heavily on taxing the labour of our residents. Of the $459.5 billion that our federal government collected in revenues in 2023-24, $217.7 billion – 47.4% – was from personal income taxes.  Of that personal income, wages and salaries historically make up approximately 60% of that.  Accordingly, if AI was to significantly erode that 60% of taxation revenue, the government could lose billions.

 

For example, if AI takes the job of a factory worker who earns, say, $80,000, there is less personal tax revenue for the government if that job loss is permanent. If that worker finds a similar paying job in another industry, like health care, then no net loss in taxation revenues for the country.  Some, however, are convinced that the job losses will be permanent. If so, then the taxation revenues will also be permanently reduced.

 

Bill Gates and other left-of-centre thinkers have advocated that if such job losses are permanent, then some form of “robot tax” would need to be introduced in order to replace the lost taxation receipts.  While the concept is interesting, I struggle to see how such a concept is practical.  A country is going to tax the productivity gains resulting from replacing a human being?  Not sure how you would track that.

 

Instead of introducing impractical taxes, I think this issue should be part of an overall broader tax reform as I often discuss.  If societies such as Canada have the potential to experience significant job losses – and thus reduced taxation receipts – as a result of AI efficiencies, then this is an opportunity to think big about how we want our future tax system to look like (especially since our tax system is in dire need of reform to begin with).  Perhaps this is the opportunity to shift away from our heavy reliance on taxing labour / personal income and move more heavily towards consumption taxes such as the GST / HST. Eminent economist, Jack Mintz, has long advocated for a greater role for consumption taxes.

 

An income tax penalizes earnings and savings. On the other hand, a consumption tax only kicks in when money is spent which encourages investment and growth. A well-designed consumption tax, like our GST, applies across the economy which includes human workers, robots, corporations, and individuals and since it taxes output, not inputs, there is no need to distinguish between AI’s productivity and a human’s.

 

And since our GST also applies broadly to a large variety of goods and services apart from the necessities of life (like food, clothing, most homes, health care and education), and offers credits to low-income Canadians, it is “fairer” with the regressiveness significantly reduced.

 

One Comment About Leadership – Afflictions, Character and Hope

 

Those who know me understand I’m a practicing Catholic and attend weekly Mass. Last Sunday’s second reading (Romans 5:1-5) really struck a chord. It includes this timeless passage:

 

“…we boast of our afflictions, knowing that affliction produces endurance, and endurance, proven character, and proven character, hope, and hope does not disappoint…”

 

That’s a powerful sequence: affliction → endurance → character → hope.

 

Whether you’re religious or not, the message is clear: adversity builds strength and vision. For leaders, it’s a reminder that the easy path rarely leads to growth. Setbacks and challenges can shape your character and instill a sense of hope that you can pass on to your team.

 

Don’t shy away from the hard stuff. It just might make you – and those around you – better.

 

One Comment About Economics – Worldwide Economic Uncertainty

 

As G7 leaders gather in the backyard of my hometown – Kananaskis, AB – the media is buzzing that a new trade deal between Canada and the U.S. is “imminent.” As of writing, President Donald Trump and PM Mark Carney are still sparring over details, but a deal reportedly remains within reach.

 

While we technically already have the USMCA, Trump’s recent tariff volleys make it pretty clear: the U.S. wants a revised deal, one more to its liking.

 

Add to that the recent oil price spike, thanks to escalating tensions between Israel and Iran and the global economic outlook remains shaky at best.

 

If you’re an entrepreneur or a senior executive, you’re probably used to volatility and have contingency plans in place. If you’re not, buckle up. The ride’s likely to get rougher before it gets smoother.

 

Bonus Comment – Quote From Author and Disability Advocate – Helen Keller (who was blind and deaf) – About Developing Character

 

“Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, vision cleared, ambition inspired, and success achieved.”

 

Absolutely agree! Leaders, be cognizant of how to develop character!

 

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.