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Tax Reform for Efficiency and Fairness in Canada

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  • Alexandra Bibbee
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    Abstract

    The Canadian government has set a high priority on reducing the economic burden of taxation. In a context of fiscal surpluses, it has been: markedly reducing corporate income and capital taxes; providing more personal tax relief especially at lower incomes and above all for saving; and cutting the federal value added tax (GST). While such measures, in particular income and capital tax cuts, reduce the economic damage caused by tax, Canada should go further along this route with significant revenue-neutral reforms to achieve a more efficient tax mix that also retains its redistributive features. Numerous tax preferences to favoured activities, firm types, investments and savings vehicles narrow the tax base and create loopholes, keeping statutory rates higher than otherwise and distorting resource allocation. They should therefore be removed. It would also help to shift the tax mix toward more user fees and indirect taxes – including VAT, environmental levies and property taxes – which do not distort inter-temporal economic choices as income taxes do. Lower corporate and personal income taxes could improve the incentives for capital formation, FDI, innovation, entrepreneurship, labour-force participation, work effort, and the pursuit of higher education. The result would be higher standards of living. Réforme fiscale au Canada pour plus d'efficience et d'équité Le gouvernement canadien s’est fixé pour priorité d’alléger la charge fiscale qui pèse sur l’économie. Dans un contexte d’excédents budgétaires, cette stratégie s’articule autour des objectifs suivants : réduire de manière significative l’impôt sur les sociétés et les impôts sur le capital ; multiplier les allégements fiscaux en faveur des particuliers, surtout ceux à bas revenus ; et abaisser la taxe fédérale sur les produits et services (TPS). Même si ces mesures, et notamment les baisses de l’impôt sur le revenu et sur le capital, atténuent les préjudices économiques causés par l’impôt, le Canada devrait aller plus loin dans cette direction en engageant de vastes réformes sans incidence sur les recettes visant à établir une structure fiscale plus efficiente qui conserve ses fonctions redistributives. De nombreux avantages fiscaux qui favorisent certains types d’activités, d’entreprises, de produits d’investissement et d’épargne restreignent l’assiette d’imposition et créent des failles, ce qui maintient les taux légaux à un niveau inutilement élevé et fausse la répartition des ressources. Ils devraient donc être supprimés. Il serait également judicieux de rééquilibrer la structure fiscale en faveur des droits d’utilisation et des impôts indirects – y compris la TVA, les impôts liés à l’environnement et les impôts fonciers – qui ne faussent pas les choix économiques intertemporels, contrairement aux impôts sur le revenu. Une baisse de l’imposition des ménages et des sociétés pourrait encourager la formation de capital, l’IDE, l’innovation, l’entrepreneuriat, la participation à l’activité économique, le travail et la poursuite d’études supérieures, améliorant ainsi le niveau de vie.

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    File URL: http://dx.doi.org/10.1787/240634153012
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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 631.

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    Date of creation: 12 Aug 2008
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    Handle: RePEc:oec:ecoaaa:631-en

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    Keywords: personal income tax; taxation; Canada; dépense fiscale; Canada; progressivité de l’impôt; impôt sur les corporations; taxe à la consommation; taxation; impôt sur les particuliers;

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