Recommendations:
- Prevent tax avoidance through the use of tax havens
- Ensure any trade agreement with the US protects Canada’s right to effectively tax foreign multinationals
- Create a new top marginal tax bracket on personal income over $1,000,000
- Create a new framework for taxing the wealth of the top 1% in Canada
- Implement a permanent windfall profits tax that can be triggered during crises
- Implement a minimum tax on corporate book profits
- End tax expenditures that disproportionately benefit high-income earners
- End public financing for the fossil fuel industry
- Support international coordination on taxing multinationals and the ultra-wealthy
- Increase transparency to shed light on corporate tax abuse
Introduction
In the first quarter of 2025, Statistics Canada reported that the income gap between the richest 40% of Canadian households and the poorest 40% of Canadian households hit a record high. This is concerning because decades of research have shown that countries with higher levels of income inequality have higher rates of violence, bullying, and suicide, as well as lower life expectancy, and educational outcomes. Growing inequality has also been shown to undermine trust in democratic institutions and further empower the wealthy to influence elections.
As the federal government decides on which nation-building projects to pursue to strengthen Canada’s economic independence, distributional consequences should be kept top of mind. The failure to incorporate distribution into decision-making is one of the reasons that income inequality is at record levels today, that affordable housing feels out of reach for many Canadians today, and that the wealthiest 1% of Canadians own one quarter of the country’s wealth. From 1982 to 2022, the incomes of the top 0.01% increased six times faster than those for the bottom half of Canadians.
It must be a top priority of the government to reverse these trends. We recommend several measures that the government should take to raise revenue to fund needed projects like building a national electricity grid and new publicly-owned affordable housing, that also address the problem of rising inequality.
1. Prevent tax avoidance through the use of tax havens
Despite the implementation of the Global Minimum Tax Act in 2024, Canadian assets in tax havens reached $682 billion in 2024, more than all the foreign assets Canadians hold outside the US combined. Canadian assets will continue shifting to tax havens, eroding Canada’s corporate income tax base, until Canada ends the tax incentive to be based in tax havens. The Tax Justice Network estimates that this already costs Canada $15 billion in revenue annually. Changing our laws to collect this revenue would merely ensure that all corporations are subject to the spirit of our existing tax laws. Canada should immediately require companies to have a genuine business reason to set up foreign subsidiaries in tax havens and end tax information exchange agreements with known tax havens to prevent companies from being able to funnel profits through foreign subsidiaries in tax havens and return them to Canada tax-free. Canada could also consider shifting to a tax credit system for foreign subsidiaries as opposed to the current exempt surplus system.
2. Ensure any trade agreement with the US protects Canada’s right to effectively tax foreign multinationals
Canada is currently in the midst of trade negotiations with the United States. Any resultant trade agreement must ensure Canada’s right to tax the billions in profits that foreign multinationals collect within Canada. This could be through reinstating the Digital Services Tax (similar taxes are still in place in dozens of countries), or ensuring the US’ participation in international agreements on the distribution of taxation rights of multinationals, such as the OECD Base Erosion and Profit Shifting Mulilateral Agreement or the UN Tax Convention process. Another policy that could raise revenue and reduce reliance on foreign digital services is ending tax deductibility for foreign internet advertising. To date, Canada has abandoned its Digital Services Tax and allowed US companies to be exempt from a global agreement on corporate minimum taxation while getting nothing clear in return.
3. Create a new top marginal personal income tax bracket
The personal income tax system is not only a revenue-creating mechanism. Like other parts of the tax system, it also shapes the behaviour of people and corporations in ways the government believes are socially desirable. In the post-WWII era, many countries had very high top marginal income tax rates. These rates had very high thresholds, meaning that few people paid them and they raised little revenue. However, that does not mean they were ineffective – they encouraged companies to reinvest profits and increase wages for workers instead of paying executives and shareholders exorbitant incomes. In 1971, the combined federal and provincial marginal tax rate on income over $400,000 ($3.16 million in today’s dollars) was 82.4%. This rate applied to less than 0.01% of taxpayers because it effectively discouraged such outrageous incomes. Today, the top personal income tax bracket, with rates of 44.5-54.8% across provinces and territories, applies to 2% of taxfilers and does little to deter extremely high incomes. A new federal income tax bracket with a rate of 37% on income over $1,000,000 would affect only 43,000 people or 0.135% of taxfilers, deter outsized salaries, and raise $1.3 billion in 2025.
4. Create a new framework for taxing the wealth of the top 1% in Canada
Since wealth tends to grow faster than the economy as a whole, wealth and power can become more and more concentrated in the hands of a few. In Canada, billionaire wealth increased by $113.4 billion in 2024. As of July 2025, the 20 richest Canadians have over $239 billion in wealth, equivalent to over 10% of Canada’s GDP. This level of wealth concentration gives individuals outsize influence over our society and undermines democracy. The most straightforward way to address this problem would be through a progressive wealth tax.
For example, a 1% tax on net wealth above $10 million — with higher brackets and rates on wealth exceeding $50 and $100 million — could raise over $39 billion in the first year and nearly $500 billion over 10 years. Especially when we consider recent research debunking the popular narrative that the wealthy will flee developed nations with higher taxes, it is clear such a tax would redistribute wealth and power, as it would not affect 99.4% of Canadians.
There are many ways in which Canada’s tax system currently rewards speculation and hoarding, rather than investment and production. Existing property taxes which tax improvements at the same rate as land discourage development. These could be replaced by land value taxes which only tax the value of land. Similarly, the capital gains loophole rewards large corporations that speculate on property values just as much as it rewards individual entrepreneurs. Capital gains tax breaks, tax credits, and the REIT exemption have all contributed to the housing affordability crisis. Canada is also the only country in the G7 that does not have an estate or inheritance tax, allowing billions in wealth to pass tax-free to people who did nothing to earn it, rather than promoting equity and upward mobility for working and middle class Canadians. Government policy must stop providing tax breaks for investor-owned housing, encourage real investment instead of passive speculation, and tax inheritances.
5. Implement a permanent windfall profits tax that can be triggered during crises
Canada which has a large number of highly concentrated, under-competitive industries. This gives Canadian corporations significant power to set prices, which many of them exploited to collect record profits during the pandemic, while contributing to rising inflation. Although profit rates have fallen from their 2022 peak, they remain well above pre-pandemic levels, continuing a concerning trend of rising profit rates that has contributed to rising inequality. To ensure corporations cannot take advantage of crises to increase their profits at the expense of consumers, Canada should implement an excess profits tax that is triggerable during crises that lead to price increases. The tax should be set at a high rate for profits above pre-crisis levels to disincentivize corporations with price-setting power from using that power to profiteer. Such a tax could be triggered to protect consumers if, for example, tariffs result in significantly increased prices, giving corporations the opportunity to pass off margin increases as the result of tariffs.
6. Implement a minimum tax on corporate book profits
With the proliferation of tax credits and the increasing complication of the tax code, corporations have reduced their effective tax rates far below statutory tax rates. There is no evidence that these expanded tax credits have boosted investment in Canada. Despite the statutory corporate tax rate averaging around 26% across Canada, the effective corporate tax rate was only 17% in 2024. Like the alternative minimum tax for individuals, the government should implement a minimum tax on book profits of large corporations to prevent corporations from being able to combine tax credits to avoid paying any taxes, with no benefit to the public. The United States already has a similar minimum book profits tax. Canada should immediately implement a minimum tax of 21% on book profits for all large corporations.
7. End tax expenditures that disproportionately benefit high-income earners
91% of the dividend tax credit (DTC) benefits the top 10% of earners. This tax expenditure, which is projected to cost $8.1 billion in 2026, is also an equity problem since it disproportionately benefits men and white Canadians relative to women and racialized Canadians. Because corporate taxes are not necessarily fully borne by shareholders, the DTC does not prevent double taxation. Furthermore, given that corporations do not actually pay the full statutory corporate income tax rate, the DTC is much too large to offset the taxes actually paid by corporations. The DTC should be removed, or at minimum, linked to the actual amount of taxes paid by corporations.
8. End all public financing for the fossil fuel industry
Canadians are facing the real consequences of climate change every day, as temperatures continue to set records, and wildfires burn across Canada. The fossil fuel industry contributes more to Canada’s emissions than any other industry. Canadians deserve a real plan as to how Canada will shift away Canada’s industry that contributes most to climate change.
Nation-building projects should build for the low-carbon economy of the future, not the economy of the past. Canada’s plan should start by ending all public financing for the fossil fuel industry, which reached nearly $30 billion in 2024.
The previous government made a modest pledge to phase out “inefficient” fossil fuel subsidies, but this promise was seemingly abandoned in the 2024 Fall Economic Statement and 2025 Liberal platform through the extension of the Accelerated Investment Incentive for oil and gas expenses.
Given the industry’s recent track record of increasing payouts to shareholders instead of creating new jobs, further financing for the fossil fuel industry will not only contribute to climate change, but will exacerbate inequality and funnel wealth out of Canada to large oil companies’ predominantly foreign shareholders.
9. Support international coordination on taxing multinationals and the ultra-wealthy
Preventing tax avoidance and ensuring the effective taxation of the ultra-wealthy will require international coordination. Led by the Africa Group, international cooperation on taxation is now proceeding through the UN. Canada must stop voting against the development of a UN tax convention, and instead engage fully in international cooperation to deter tax avoidance and tax the ultra-wealthy. Canada should also support the G20 proposal to impose a global minimum tax on billionaires.
10. Increase transparency to shed light on corporate tax abuse
Large, powerful institutions must be accountable to the people whose lives they affect. Multinational enterprises are already required to provide tax authorities with country-by-country reporting of their financial data. To increase trust in the corporate tax system and enable public accountability, Canada should also make corporate country-by-country financial reports public, like Australia and the EU have done.
