Real recovery will need real tax reform

Any prescription for lasting economic recovery in Canada will require far more than doling out taxpayer-funded assistance to business.

It has to include meaningful changes to government tax regimes and the environment it creates for promoting business growth.

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As the Organization for Economic Co-operation and Development’s (OECD) director for tax policy and administration argues in Tax Policy Reforms 2020, global economic recovery should not simply be a case of returning to business as usual.

The goal, according to Pascal Saint-Amans, should be to “build back better and address some of the structural weaknesses that the crisis has laid bare.”

The OECD rightly contends, for example, that a top priority in that building-back-better game plan should be tax reforms to accelerate the shift to clean energy, because around 70% of global energy-related CO2 emissions remain untaxed.

There also needs to be a co-ordinated international push to eliminate the economic inequities that are punishing workers at the low end of the wage scale and removing basic social safety net benefits for them and their families.

Closer to home, municipal tax reform must eliminate damaging money grabs such as the highest and best use property designation.

Basing property tax on what land could be used for rather than what it is being used for now radically skews lease rates and dramatically inflates the cost of doing business.

Payroll taxes that threaten to sink already pandemic-damaged businesses also need to be rethought, and the overall complexity of Canada’s Income Tax Act, which began as an 11-page Income War Tax Act in 1917 but was last seen running to around 3,230 pages, needs to be radically simplified through a flat tax regime.

There is not a new normal or a return to the old normal in our future.

This is the era of no normal, and it presents huge challenges but also huge opportunities to improve how governments and businesses operate.

Business in Vancouver

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