Time for Tax Reform?

• Author: Dolson, Mike

Following the release of the Department of Finance's private corporation tax proposals on July 18, 2017, which was far more controversial than the government anticipated, over 21,000 letters containing comments, criticisms and suggestions were sent to Finance. A common theme contained in many of the letters was that the tax proposals should be abandoned in favour of a comprehensive review of Canada's tax system and broader tax reform.

Calls for tax reform raise their own questions. What is tax reform? Who would be responsible for this effort, and how would they do it? Why are so many people calling for tax reform now? We'll try and answer those questions in this article.

What is tax reform?

Tax reform is a process that, based on historical experience, has three identifiable stages. First, a body of experts will complete a back-to-basics review of foundational aspects of the Canadian tax system and make "big picture" recommendations. These experts include including legal and economic scholars, tax practitioners and government representatives. Second, the Department of Finance will release its own report identifying which recommendations it accepts and how Finance believes those recommendations should be implemented. Third, Parliament will pass legislation enacting the recommendations that Finance has adopted.

The most significant tax reform in Canadian history happened in the 1960s, when the Royal Commission on Taxation suggested that large-scale changes to Canada's tax system were needed. The Department of Finance subsequently released a White Paper endorsing most (but not all) of the proposed changes, and Parliament responded by repealing the existing, 1940s-era Income Tax Act and replacing it with the current Income Tax Act in 1972. A smaller tax reform project was undertaken in 1987, and advisory panels in the late 1990s and 2000s made recommendations that led to minor changes to the tax system.

Who would undertake tax reform, and how?

Tax reform is a process that, based on historical experience, has three identifiable stages. First, a body of experts will complete a back-to-basics review of foundational aspects of the Canadian tax system and make "big picture" recommendations. These experts include including legal and economic scholars, tax practitioners and government representatives. Second, the Department of Finance will release its own report identifying which recommendations it accepts and how Finance believes those recommendations...