We’ll closely analyze the federal government’s 2019/20 budget when it is tabled on March 19 for how it advances tax fairness for Canadians—and especially to see if it includes measures we recommended in our pre-budget submission.
In this pre-election budget, we’re not expecting the Liberal government to include any measures that could cause them trouble at the ballot box. For instance, we don’t expect them to increase corporate taxes or raise the rates on top incomes. But there are some tax fairness measures that could generate significant revenues and be politically popular.
Apply taxes to foreign e-commerce giants: Canada remains one of the few G20 nations with zero plans to tax foreign digital corporations such as Google and Facebook. As it stands, these massive corporations make billions off Canadian sales but because they make most of their sales from outside, get away without paying the same taxes as our Canadian-based companies while also benefiting from measures that allow businesses to deduct the cost of advertising. Other countries are introducing their own measures to tax foreign digital giants and even some of our own provinces, such as Quebec and Saskatchewan, are now applying sales taxes to imports of digital services.
We hope government will listen to the strong public support for taxing e-commerce companies for the business they carry out in Canada, which is backed by members of the business community, media and culture sectors, labour organizations, and the House of Commons trade committee. Until foreign e-commerce giants are taxed fairly, our own businesses and workers will lose out —and so will all Canadians, as federal and provincial governments miss out on billions in revenues.
Eliminate unfair and ineffective tax breaks: The government vowed in its 2015 election platform to target unfair tax breaks but fell significantly short of that promise. Many of the remaining tax expenditures favour high-income Canadians and a recent analysis by the CCPA found the majority of them pay out more to men than women. The government should focus on eliminating the most egregious breaks such as the stock option deduction and the corporate entertainment deduction, which even the US has removed. Furthermore, it is time for a review of the current expenditures to assess whether they are working for all Canadians. We hope to see future plans for a public review that includes consultation from all sectors of the economy and society, and not just those with power and influence.
Tackle international high income and corporate tax avoidance and evasion: Every country suffers when the world’s largest corporations avoid paying tax. Canada especially needs to outline steps to address this growing problem. We called for the federal government to introduce an economic substance test for corporations using offshore subsidiaries and to cap the interest payments that they can expense to those subsidies. Other important measures for government to pursue include:
- Introduce stronger penalties and enforcement of tax laws, especially for corporate and offshore tax evasion by going after promoters and facilitators of evasion schemes including accounting firms, and provide the CRA with the resources to do so.
- Implement unitary taxation of multinational companies, with formulary apportionment and a minimum tax rate.
- Renegotiate treaties with tax havens to end double non-taxation of corporations and wealthy individuals
Create a beneficial ownership registry: Canada has the weakest corporate transparency rules among all G20 countries, which is making us a haven for shell companies and money laundering, so much that it’s known internationally as “snow-washing.” Real estate is especially attractive and money-laundering through it has driven up housing prices for the rest of us in Vancouver and other major cities.
Canada needs a national public registry of the “beneficial owners” or the true owners of a businesses and properties. An open and accessible registry would help law enforcement, tax authorities, financial institutions, investors, civil society and media to investigate and determine who the real owners are. Government could also take steps to publish information on how much large corporations actually pay in tax, as is done in Australia and as the EU will soon require.
National pharmacare program: Canadian workplaces and households have much to gain from a national pharmacare program, but it’s important that government invests in a comprehensive universal plan that is funded by progressive tax measures. Savings from drug costs and private insurance premiums could translate into significant benefits for families with net savings that could average up to $600 per household. Funding options include increasing the corporate income tax rate, closing tax loopholes and introducing a higher top income tax rate.
Help all Canadians access tax benefits: Not every Canadian can afford accountants and lawyers to help them do their taxes and receive all the benefits they’re entitled to. The government and CRA should consider measures to make tax filing more accessible to average Canadians, including sending out pre-filled tax forms to all those who request it. Norway does this, with large savings in time, expense and frustration for households.
Ensure carbon taxes are progressive: The government’s carbon tax and incentive payments to households are a positive step in reducing pollution and holding polluters accountable, while refunding households for their increased costs. However, the federal government can take bolder steps to have industry reduce their emissions, while ensuring that those affected have the supports needed to adjust, with good green jobs.
Carbon pricing should be used in combination with other measures to address climate change including increased regulation, higher green standards for infrastructure and urban design, public investments in renewable energy and transport, as well as subsidies to help low-income households and businesses adjust to the new carbon pricing model. Canada should also consider tariffs on imports from countries that do not have sufficient carbon pricing regimes.