It’s safe to say that taxes aren’t everyone’s favourite subject. Canadians are usually confronted with the idea during tax season: as we frantically get our financial documents in order, while tempering our slight annoyance with the government for peering into our pockets. But we need to have more comprehensive conversations on how taxes affect our lives on a daily basis; because the fight for a fairer tax system is real and urgent.
Taxes should be understood as a overarching system. It is the very foundation that enables our society to function and our ability to live healthy and productive lives. In Canada, income tax rates are intended to be equitable, with those who can afford to paying more. This money in addition to other tax revenue mechanisms, is then collected and used to fund healthcare programs, social and emergency services, and critical public infrastructure,.
Yet some of the wealthiest Canadians are avoiding paying their full taxes due to tax loopholes. This destroys the integrity of our tax system and its ability to support a fair and progressive society, one where no one gets left behind.
Today, the Broadbent Institute released a report on the five most egregious tax loopholes that are funneling up to $12 billion in tax revenue into private bank accounts. These loopholes are just one aspect of the tax gap Canada suffers due to the rich not paying their share. The Government recently announced plans to release full data on the cost of tax avoidance, which may indeed show that the price tag is in the tens of billions. We are demanding that the government take immediate action in the upcoming 2018 federal budget.
Here is why our call for tax fairness, which starts with closing these loopholes, is so urgent.
We are living in a time where inequality is on the rise and the economic future of many remains uncertain. In the last ten years, the incomes for low and middle income earners have not grown to the same extent as the top 10 per cent. More specifically the top 1 per cent now owns 11.2 per cent of the total income share, up from 10.3 per cent. For racialized Canadians the income disparity against their White counterparts is quite stark. Those who directly immigrate to Canada only make 69.8 per cent of the median income of a White person; while Canadian-born, second generation immigrants are still unable to close the gap, making 87.9 per cent. Lastly, the low income rates for recent immigrants is at 31.4 per cent, while the rate for non-immigrants sits at 12.5 per cent. As presented, inequality is directly tied age, race, gender, status and access to opportunity. With an increasingly aging population, it is important to note that seniors with low incomes have also increased by almost 3 percent in the last ten years.
To combat inequality, several measures need to be taken. The path less spoken about is the need for a more progressive tax system. Tax fairness or more formally known as progressive taxation, requires a full comprehensive review of the elements of our tax system that favour wealthy Canadians, CEOs and corporations over middle to low income Canadians. Canada’s tax system as it stands remains remotely progressive. The recent revelations of the Paradise Papers and its predecessor the Panama Papers show how offshore tax havens are frequently used by the rich to avoid taxation through legal means. Additionally, domestic tax loopholes such as: the Capital Gains Tax, Employee Stock Options, Meals and Entertainment Deduction and the Dividend Tax Credit, are go-to tax breaks for our country’s rich. These loopholes allow for unfair income tax breaks that most Canadians will never be able to access.
The Canadian government loses billions of dollars each year due to tax avoidance. This is money that should be re-distributed and used to strengthen health and social programs such as universal pharmacare and affordable housing. This would close the inequality gap and create opportunities for all Canadians to get ahead.
When the Canadian government allows corporations, CEOs and other wealthy Canadians to continue to pay taxes at a rate that is often lower than that of a middle-income earner, they are sending us a strong message: That Canada’s tax system is built to benefit the elites. This needs to change.
In the 2015 election, the Liberal government promised to put an end to unfair tax breaks for the rich. We’ve yet to see this promise come to fruition. As we lead up the 2018 federal budget, finance minister Bill Morneau must take the necessary measures to close tax loopholes and crackdown on tax havens once and for all.
Taxes are at the core of everything we do. With gaping holes in our health and social programs, such as the absence of a pharmacare program, tax fairness should be an ongoing goal in our pursuit of creating a fair, just and equitable Canada.
Join the Broadbent Institute in making tax fairness a priority.