What are the problems?
Article Abstract:
Canada's personal, corporate, and other taxes tend to discourage saving, negatively affect investment decisions, and violate good tax system basics, according to the Economic Council of Canada. Investors are subject to double taxation on earnings because income and corporate taxes are not integrated. Savings are taxed twice: as part of income and as part of the flow of returns. Corporate tax provisions that distort the system include: investment tax credits, accelerated machinery depreciation allowances, unfavorable tax treatment for equity finance, and preferential tax rates for certain types and sizes of businesses. Provincial sales taxes and federal manufacturers' sales taxes also introduce distortions. Property taxes favor residential property owners over business owners. Variations in tax rates on capital income are said to take a heavy toll in Canadian productivity performance.
Publication Name: Au Courant
Subject: Business, international
ISSN: 0226-224X
Year: 1987
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Proposals for reform
Article Abstract:
The Economic Council of Canada proposes tax reforms that are claimed to be simple, fair, and efficient. The emphasis of Council personal income tax proposals would be on 'lifetime' tax, which would treat different types of savings neutrally and tie marginal tax rates more closely to lifetime income. The Council proposes removing limits on contributions to registered savings, such as pension plans, and doubling the current $1,000 deduction for dividends and interest. Continued compensation for inflation through indexing devices is recommended. The Council proposes abolition of tax deductions for manufacturing and processing firms, with introduction of a combined federal-provincial statutory tax rate of 33.33 percent. Small business would be taxed at a 25 percent rate for the first $200,00 of income. Variations in federal and provincial sales tax rates would be reduced or eliminated.
Publication Name: Au Courant
Subject: Business, international
ISSN: 0226-224X
Year: 1987
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The need for change
Article Abstract:
The Economic Council of Canada reports that its tax reform proposal would make Canada more attractive to investors and more competitive internationally. A widened corporate tax base and removal of sales taxes on capital inputs would allow business to pay lower taxes in general. Gradual changes are recommended, but piecemeal reform is rejected because the tax system is so interconnected. Reduced marginal tax rates and elimination of provisions that discriminate against saving could be balanced by increased revenue from taxing capital gains. The biggest change in the corporate areas would be deceleration of capital cost allowances, to be offset by lower tax rates. The Council also calls for federal sales tax reform. A return to full deductibility of provincial royalties and mining taxes is recommended.
Publication Name: Au Courant
Subject: Business, international
ISSN: 0226-224X
Year: 1987
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