CPA Canada is advocating for a principled approach to taxation in its pre-budget submission, highlighting the current system’s complexity and the need for better implementation and consultation.
CPA Canada taxation vice-president John Oakey criticised the recent increase to the capital gains inclusion rate as an example of an unprincipled tax policy.
The organisation noted that the primary goal of Canada’s tax system should be to generate revenue efficiently without unnecessary complexity.
The Home Buyers’ Plan, which allows tax-free Registered Retirement Savings Plan withdrawals for first-time home purchases, is cited as a successful policy.
However, the First Home Savings Account is said to have been introduced to address the housing crisis, before amending the existing Home Buyers’ Plan.
According to CPA Canada, the tax system has become increasingly complex, with an expanding volume of legislation that deviates from the ideals of a principled tax system.
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By GlobalDataJohn Oakey said: “The government is rightfully trying to find ways to create more transparency in Canada to deal with money laundering and terrorist financing. [But] the utilisation of our federal tax system with the broad reporting concept of bare trusts to flush out these bad actors seems questionable.
“Sheer volume of tax policies being introduced is resulting in poorly drafted legislation lacking sufficient guidance to properly implement and administer.”
The organisation has long called for a review of Canada’s tax system, which would provide an opportunity to assess the impact of the tax system on behaviour and to re-evaluate entrenched policies and exemptions.
Such a review is expected to lead to a tax system that avoids distorting economic decisions, unless there is a clear policy rationale.
CPA Canada believes that a principled approach to tax policy requires ongoing dialogue with stakeholders including its organisation.
John Oakey noted the importance of good communication with the Canada Revenue Agency to ensure proper implementation of legislation.
Despite being respected by Department of Finance officials, CPA Canada sees a need for improved communication at the political level to promote a principled approach to tax policy.
