At a time when Canada, like every other country, is looking for highly skilled workers, our tax rates make it very difficult for them to choose to work here. This is equally true for Canadian citizens and potential new immigrants. Needless to say, I hear more and more from clients and people in my network that their children who have chosen to study abroad are not returning home because they can earn and save more of their money elsewhere. I'm not surprised.
Our high tax rates make it difficult to attract investment to our country and for existing businesses to expand. That is important to improve productivity, innovation, create jobs and compete with peers in low tax areas.
The Allan Small Financial Show, featuring three tax experts—Fred O'Riordan of Ernst & Young, Jake Fuss of the Fraser Institute and Tim Cestnick, Globe and Mail tax columnist and CEO of Our Family Office—aired on September 18, 2024. .
Let's explore the low tax
We need a better, more thoughtful tax strategy as a country—one that works for everyone. Canada has not taken a serious look at our tax system since 1962, when Prime Minister John Diefenbaker appointed the Royal Commission on Taxation.
At the very least, it would be an opportunity to streamline what is, as I see it, a very complex system. At best, it can point to a better way forward. Another potentially powerful way to simplify our tax system, and make it more efficient and fair, is to use a lower tax rate across the board. This is not a new tax concept.
Over the past decade, Estonia has reaped the rewards of having the most competitive, simple and transparent tax system in the OECD. Its personal and corporate tax rates are 20%. It is set to rise to 22% in 2025 to match its consumption tax, which rose from 20% to 22% in 2024. In the case of individuals, the tax rate does not apply to capital gains; and businesses pay tax only on distributed profits.
The result: the country has been very successful in attracting start-ups and investment.
And we don't have to leave Canada to make an example of low taxes. From 2001 to 2014, Alberta had a single personal and corporate income tax rate of 10%, called the Alberta Tax Advantage. The Fraser Institute is now calling on Alberta to implement a much lower 8% tax on personal and business income to attract people, businesses and investment to the province and encourage spending. When Canadians pay less in taxes, they have more to spend and put back into the Canadian economy.
Another possible way to ensure tax fairness and generate revenue to meet government obligations is to encourage more opportunities for community, business and government to work together. For example, why not give individuals and businesses the ability to invest in infrastructure projects, such as new roads and highways, and get a rate of return over time.
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