The Agenda with Steve Paikin (Audio) - Is Canada Finally Ready for Real Tax Reform?

Episode Date: March 19, 2026

Calls for tax reform have echoed across party lines for years, but as global trade relationships shift, the pressure to act is intensifying. What, beyond political slogans, would meaningful tax reform actually look like in practice? To examine that question, we turn to Allison Christians, professor and H. Heward Stikeman Chair in the Law of Taxation at McGill University, and Geoffrey Turner, adjunct professor and Tax Counsel-in-Residence at the University of Toronto, to unpack the structural challenges facing Canada's tax system. Then, moving from theory to the real-world consequences for taxpayers, we zoom in on what matters most this filing season, with Ali Spinner, tax partner at Crowe Soberman Chartered Accountants, breaking down the key issues Canadians need to keep in mind as they file their returns.See omnystudio.com/listener for privacy information.

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If that's you, no judgment. And don't worry, you still have time. But it's always good to be prepared. So we're going to get expert advice on what you need to know before filing this year's return, including the deadline. We're also stepping back to ask a bigger question. All Canada's major political parties say the country's tax system needs an overhaul. They've been talking about it since, well, 1967. That's when the last comprehensive review happened. So if everyone agrees it needs fixing, why hasn't it happened? And what would changing the system actually mean for the economy and for taxpayers?

Welcome to the rundown. Politicians from parties across the spectrum have been calling for tax reform for years. Those calls are getting stronger now, that trade relationships are shifting. So what would meaningful tax reform actually look like? Allison Christians is a professor and the H. Heward-Steichmann Chair in the Law of Taxation at McGill University's Faculty of Law. And Jeffrey Turner is an adjunct professor and tax counsel in residence at the University of Toronto's Faculty of Law. You guys both join me in studio. Thank you so much for joining me. Great to be here.

All right. It is very rare that we have two. tax enthusiasts in studio. But I have to bring attention to this beautiful mug here, Alison, what is this? Well, you know, I have to start out by saying it's hard to find a bigger nerd than me when it comes to tax. I just really love tax law. And so I started making these and everybody loves a good, I love tax law mug. And of course, I'm from Quebec, so we do it.

And there we go. Now we have to ask, what's in it? Well, it's just water. Okay. All right. Tax season has just begun. All right. Yeah, yeah.

All right, Alison, I want to start with the basics. It feels like all we do is pay taxes on everything. It might just be the season, so that's why we're feeling that way. Do you think we as Canadians know what our taxes are paying for? Yeah, I think it's a good question, great starting question. I think we have some idea of some of the things our taxes pay for, and I think we overlook a lot of what our taxes pay for. So you probably notice your hospital when you go there and you think, okay, my tax is paid for the hospital.

And you probably don't think about how your tax is paid for like the entire court system. And, you know, it's going to reinforce your contracts when the time comes if that ever happens to you. That kind of thing. Corporate law and all that stuff. We just don't know about all of those hidden things that our taxes pay. All right. Jeffrey, what are our taxes supposed to pay for? Well, they're intended to be the means by which governments raise the revenues that they need to run the government to fund social programs. Our personal income tax system is partly conceived to effect redistributions to reduce inequality by taxing people with high ability to pay at higher rates so that the government has funds to support lower income people.

So that's the primary purpose. More recently, we've seen governments tempted to use the tax system as a policy tool to influence behavior, sort of social engineering through the tax system. And more traditional perspectives on the purpose of the tax system would object to that social engineering use of the tax system. And maybe it ought to be refocused more in its traditional purpose of raising revenues in the most neutral and least intrusive manner. Do you mind me asking if we could do a little bit of a history lesson here because when taxes were first introduced, we were funding something quite different. You know, it was a war. Things have changed a lot since then, but we are still using taxes to pay for a lot of our services. So you're right. In 1917, the introduction of our income tax in Canada to fund the expenses of World War I. And that was a tax that was at a very low rate of income. It was, it gradually, it gradually,

expanded as Canadians demanded more government services. And of course now, we rely very, very heavily, far too heavily on our income tax system. All right. With that, let's see where some government revenue comes from. When comparing the percentage of Canada's government revenue to the Organization for Economic Cooperation Development or the OECD average, individual taxes, that's what we pay around this time of month, is higher in Canada than the OECD average. The same with corporate taxes. That's what businesses pay. And property taxes, of course, when we talk about homeowners, when we look lower down on that chart there, when it comes to the consumption, that's the sales tax or social insurance taxes, the percentage of government revenue of Canada

compared to the OECD average, much lower. With that being said, Allison, when looking at this, what sticks out to you? That's good. That's a good thing. That's a good thing that our consumption taxes are lower. Why? Because consumption taxes are regressive. They hit people at the bottom of the scale, way more than they hit people at the top of the scale. And we should not be moving away from income taxes. The reason the income tax is so sustainable is precisely because it's progressive. If you're richer, you pay more because you have more ability to pay. And if you're poorer, you pay less for that reason. So for me, it's not that shocking. And it's not something I would structurally change. Jeffrey. Okay. Well, I'm not surprised that I have a different

perspective on that. That chart that you showed, the OECD stats, takes into account all three levels of government in Canada. And you do see the personal income tax base and the corporate income tax base. It's about half of overall revenues raised. And that is widely regarded as a very inefficient way of raising government revenues, because by taxing income generation, we are discouraging income, we're punishing income generation. Whereas if we were to be more like many other OACD countries and rely more on our consumption tax base and less on income taxes, we would be more strongly encouraging income generation and what do we discourage, consumption taxes. And Allison makes a good point, that consumption taxes can be regressive, but there are ways

that we use in Canada to offset that with the GST tax credit, right? That's an amount that's paid to lower income people. and its original purpose was to offset the expected GST, that lower income people whose incomes were around 30 or so $1,000 a year would incur. Now, recently, the Mark Carney's government has changed the GST tax credit, right? And they've untethered it from its historical purpose of reimbursing lower income people for their expected GST, and they've turned it into an income supplement. Right.

Now it's the groceries and essentials benefit. So now it's yet another income support for lower income people. What we really should be doing is restoring and beefing up the GST tax credit to offset that potential regressivity. Alison, we know just from this little conversation here that taxes affect our behaviors as well. So what happens, for example, if we do lower personal income tax but raise the consumption tax, what are we going to see? Yeah. So I think the first thing to note is that the reimbursement that you talked about, well, it's based on income. So you already have to do all that work to figure out what people have in terms of income.

So for me, changing, you know, trying to undo the regressivity by using the other system is, to me, inefficient, but also just, like, it just shows us that we need an income tax system because we're trying to differentiate. Now, if you increase the consumption tax and you reduce personal taxes, well, it depends on what you mean by reduced personal taxes, but we're leaving aside capital gains for right now, okay? So we'll leave aside capital gains. But if you increase consumption taxes, then you're hitting people at the bottom of the scale. And then it's going to necessitate more refund. Well, where are you getting the refund? Where's the money coming from to bring it back? I mean, you have to raise that consumption tax up, raise it up again and raise it up again.

So you're going to get people upset. So I just want to say one thing about the psychology of it. Income taxes, no one likes to pay taxes, okay? Me included, I'm a tax nerd. I don't like to pay them any more than you do. in the sense of like, oh, I could spend that money on, you know, coffee. But when I do my income taxes, I sort of have a fog around my paycheck. Like, I know income taxes are being taken out, but I don't fully interact with the tax system until April.

And then, yes, I have to fill out my tax return, but most Canadians are getting a refund because they have personal taxes on wages. So they don't feel negative toward the government. But every single time you go into a store and you have to pay 15%, you have to pay 15%, or whatever your percentages of sales tax, you're having a little interaction with the government, and it's a negative one. It's like, I thought it was going to be 100. Why am I paying $115? Dogg on it, the government's taking my money. And I just think the psychology of that is something we really need to be careful about. If you're going to switch everything to consumption,

that's going to be a way for people to push against government funding altogether. They're going to push against it, even though we know that when you reduce taxes, you reduce the the programs that we want as well. Jeffrey, I'll get your take on that as well. Well, I think people when they are facing the income tax system at the very high rates that we now subject Canadians to taxes on their income, I actually think there is a psychology, a sense of high tax burden, high compliance burden. We see it reflected in the other OECD figures about the tax-to-GDP ratio amongst OECD countries.

is Canada's ticking up there about 34.9% tax to GDP ratio. And that also is above the OECD average, which is objective data that shows that we are a high tax country. And most of that tax revenue is generated from the income tax system. And I do think there is a broadly shared sense that we are taxed too much, a little bit too excessively, even though the income taxes may be, you know, as you say, you encounter for most people at the tax compliance season. With that being said, let's talk about something that I think both of you can agree on is tax reform.

Change needs to come here. Jeffrey, I want to start with you. What do you think should happen to make paying taxes more digestible? Well, I think we need to reduce the overall tax burden in the country to at least try to get back down to our historical levels of taxes and what other peer industrialized countries in the OECD are facing. that is going to require spending reductions at all government levels, which is a huge task because governments are excessively spending and running deficits. They're not, like our taxes are currently not sustaining the level of government spending

that we've opted for. Governments are running deficits and adding to the national debt, adding to the interest expense that has to be paid on the, federally, it's $1.3 trillion of national debt. So the first step needs to be to rein in our government. spending so that we can then afford to reduce taxes. The way to do that, it's not a secret. It's not a mystery. There's a pretty good sense of unanimity on the ways to reform our tax system. We just had the CPA report published last fall. The C.D. Howe Institute just published a Big Bang

tax report a few weeks ago. And they're largely aligned with most of what commentators I've been saying on the corporate tax system. We need to have a harmonized rate of corporate income tax at a lower level than it is now so that we're more competitive with other countries that we're competing to attract globally mobile pools of capital. That means eliminating the small business deduction, which is going to be highly controversial because the small business sector relies on that, and that's deeply entrenched. But imagine the simplicity benefits that we could gain if we had a single harmonized and more competitive corporate income tax rate, it would simplify many of the features of our corporate income system immensely. On personal,

income taxes, it's very clear that the rates need to be reduced and shift the burden to consumption taxes. This was the unanimous recommendation of these reports. Not everybody in the country agrees with that, but that's what those who are quite thoughtful about our tax system have said. And so the idea is to minimize or reduce somewhat the marginal rates that people are exposed to. As you know right now in Ontario, the top marginal rate kicks in at a relatively low income threshold of $258,000 now. I mean, that's not a super rich, highly wealthy person, and it's certainly much lower than the United States. The high rates kick in at much higher income levels. And the top marginal rate is 53 and a half percent

for an individual earning each extra dollar over $250,000 a year. I mean, it's over that psychological 50 percent barrier. So clearly we need to reduce those rates. I was not going to get you to respond on a few things. One of the things that Jeffrey had mentioned was about reining in that spending. I'd want to get a better understanding of potentially what would happen. You know, what would we see? Yeah, you don't want to have hospitals. You don't want to have public health care.

You don't want to have education systems that works. Just look south of the border if you want to see what raining and spending looks like. It looks like privatizing everything. And that means you're going to have to pay that out of your pocket. So when people talk about this, like I understand why the thrust of the people that write reports, CD-HOW, CPA, I understand the thrust because they're focused on efficiency and I totally get it. But at the end of the day, if you want to have a country that does not have social programs, this is the correct route. That is correct.

That's the road you should go down. I mean, just looking at the federal government, there's several buckets of spending. There's transfers to individuals. So that's like the child benefit and OAS and GIS for seniors. There's transfers to governments, and that's what largely funds the benefits. provincial governments' education and health care spending. There's just general government expenses, and that's like everything else, and that's been inflated over the years because of the growth and the size of the government, the scope

of the government, and the Carney government has made baby steps to start reining in that, and then there's interest on the national debt, and that's another one that's unfortunately out of control a little bit. That's just, that's project, that's 70, sorry, right now it's $55 billion interest in the current year, $55 billion, just on interest. to cover the interest payments of the federal government, and that one is projected to increase. But the main target of Iranian government spending probably needs to be the transfers to individuals, right?

And in particular, the transfers under the OAS program to seniors, and this is going to be very, very controversial, but this is the intergenerational inequity that has been baked into our tax and fiscal system for decades. ever since the initial decision was made to adopt a pay-as-you-go system for income support for seniors. And that was tenable and sustainable in the 1950s and 1960s when the program was initially adopted. And it was justifiable for current generations to pay for seniors because they went through World War II and they went through the Depression.

But we still have the same pay-as-you-go system for OAS. And I wonder if the arguments are still as compelling that we should ask young people today to subsidize seniors who are making, you know, incomes like that. OAS doesn't, you get full OAS up to, what, $90-some thousand and it doesn't phase out until $150 some dollars. All right. Take it to your point. Allison, I need you in there as well.

Let's get some points as to what Jeffrey had said, but there are lots of challenges in reforming the tax system as well. Break those down first. Yeah. So, look, I think that the focus, I don't disagree, actually, that it should be means tested. there should be some means testing, and that's going to solve some of those problems at the top. But I don't think we've talked about corporate subsidies at all in this conversation, and that's, come on, that's the real problem here.

It's not payments to seniors that we can fix with the means testing. But I will say that I don't see a bloat, right? Like I know that people like to talk about, like, oh, the government has ballooned and bloated. No, I don't think you see it. If you look at the Statistics Canada, it's not there. And the interest on the debt, perpetual problem, of course, but a balanced budget isn't correct either. That's not correct because that's not an investment in the future. So we can invest with debt.

That's okay. That's not something to be a boogeyman. What is to be scared of is that we are subsidizing the old economy. We're subsidizing old things. And every single report I have ever read tells me we need more tax credits. we need more tax cuts for corporations. And, you know, we need to incentivize growth. And every politician is going to tell you that.

Every single one on both sides of the aisle, they will always say that. Tax cuts are good. Tax cuts are good. But the big picture is if you cut too much tax, then what are you cutting? So don't just cut for the sake of cutting. You need to be thinking, well, what are we trying to finance here?

Like, what's our project? As a society, as a country, what is our project, and what does it take to finance? that. With that being said, let's talk about the reform. What would that? What are we looking at? Yeah. So I think you probably agree with this and I see it in the CPA report as well. I think it's time for another Royal Commission on tax. I think that, you know, when I came to Canada to start teaching, I looked at the Income Tax Act and said, what the heck is going on here? It's way too long. It's way too complicated. There's way too many funny roads through that don't make any sense.

time to rethink it. And we have a precedent from the 60s, the Carter Commission. And basically what you need is a commission. You need to, like, get the experts that range across ideologies, that range across expertise, and you need to give them a mandate. Go look at the system. Go tell us if actually tax cuts really are going to do this thing. Give us the numbers.

Give us the data. Show us where we need to fix all the rules all together to get a, comprehensive system. Now, we both know government's not going to do it. Whatever is in that report, the politicians won't do it. Why not? Because it will be painful to do some of the... There will be political opposition from those who suffer from the reforms. Yeah, because you have to think of the tax system right now. It's like a Christmas tree and everybody's got a present underneath. And if you do reform, we're going to take some of those presents away. All right. One last question to both of you. Jeffrey, I'll start with you. If there is one thing,

that you would like to see reformed with our current tax system. What would you like that to be? Well, I would like to focus first on corporate income tax reform because we have a productivity crisis in this country, and what's the reason for that, inadequate business investment in the machinery and technology that allows our citizens to work more productively. We need to attract more capital and more investment

into Canadian businesses. I would see a reform of the corporate income tax system first. And as I said, by harmonizing the rates and simplifying. And not just simplifying because we don't like complexity because it frustrates us. It's because of the compliance burden. It is costly for businesses and individuals who have to pay advisors to advise them on what to do, how to just comply and navigate with the system and how to deal with their compliance burden. So the purpose is to reduce the compliance burden and save all of those.

cost. So I would focus on business taxes first. All right. Awesome. Okay, great. So I'll do the opposite. I think we should look at people. I think we should think about people first. And, you know, what is the great Canadian promise, right? There's a social safety net that makes it possible for people to thrive. And how do we support that social safety net? Not privatizing the healthcare system and not privatizing things that are, that we need for everyone to thrive and making sure that the investments are put in the right place. So I think the focus ought to be on the people and not on corporate profits.

And I think it's borne out in the wealth gap. I think we see the proof that I'm right, always right, Jeffrey, always right, that we should be looking at this because we are seeing an increasing wealth gap, meaning that we're getting more space between the rich and the poor, and the rich are getting richer

because we are giving them too much. So we need to be getting a little bit more aggressive, but again, I understand that's taking some gifts away from people, and it does bump up against that 50% mythology thing that we're told we're supposed to start worrying about tax at 50% when rich people pay it. But most of us aren't rich. So that's not, to me, not really actually our problem,

but that's, you know, I think the Royal Commission would at least, I think, get us a place between us where we're going to figure out which of those is the right way to go. Unfortunately, I feel like we can go on and on for this. I really appreciate this. I didn't think I would say this, but I had a lot of fun with this one. Taxes, who knew? Who knew?

Appreciate it. Thank you so much. Thank you, Jeffrey. Thank you. All right. We've talked about the big picture. Now let's zoom in on the things to keep in mind when you're filing your taxes this year. Allie Spinner is a tax partner at Crowe Soberman, LLP.

And she joins us now at Studio. How are you doing? I'm great. Thank you so much for having me. It's great to have you. Now, before we begin, want to clarify that this is not financial advice that you are giving, just some things to keep in mind during the tax season and that people should consult their accountants for questions. All right. First things first, what should people know before they even file their taxes? Is there something that we should have? I'm sure there's people who's got papers and receipts scattered everywhere. What's something that they should think about before? So something that people should think about is that even if, even if you should have,

if perhaps they think that they don't need to file their taxes, it's always a great idea to still file your taxes, even if you think, you know what, I don't think I owe any money to the government this year. The reason being is that if you don't file, there's many benefits that might be available to you that come automatically just from filing a tax return that wouldn't otherwise come if you don't file. As well, there could be certain refund items or certain credits or deductions

that you might not realize, but if you file that tax return, you'll make sure that you get them. What's the first step when it comes to filing your tax? taxes. Certainly the first step, as you mentioned it, is get organized. Make sure you find all of your information. Something that's excellent that's available is if you are registered with an online account for CRA My Account, the great news is that many of your tax slips are actually uploaded already to the CRA website. So I would encourage everybody to gain access to their CRA online account if they don't already have it. That's a great first place to check to make sure if there's

any tax slips there that you weren't realizing you had coming to you. That's a great place to check and then make sure you gather up all of your tea slips for any income amounts that you have, certainly items like charitable deductions, medical expenses, the usual pieces of paper. All right, you talked about credits, so let's talk about a few. What's out there for families or for people who are thinking about having a family? There's a couple of examples out there. Yeah, for sure. There's one particular credit that's new this year that I'd like to talk about, which is the Ontario Fertility Treatment Tax Credit. That's a new one, and it begins as of 2025. So if a family who is starting a family or adding to their family incurs fertility treatment costs,

the great news is that this year in Ontario for up to $20,000 of expenses per year, that family, one member of the family, so one of the spouses or if it's a single parent, just the single parent, can claim up to $20,000 of expenses, which actually translates into a refundable credit of up to $5,000. So it's 25% of the amount spent, up to a maximum benefit of $5,000. And I mentioned it's refundable, meaning that even if you didn't have any income and you otherwise wouldn't have taxed to shelter, this is a refundable credit. The government will send you the money back. Also, that money that you're spending to get this special Ontario credit also counts towards the non-refundable medical expense tax credit. So fertility treatment expenses, certainly that's something that people, if they're starting a family and spending money there, should be making sure that they're claiming as medical and the Ontario fertility tax treatment credit. All right. And there's adoption as well? There's absolutely an adoption tax. Yeah, there's absolutely an adoption tax credit. That credit is, it's up to almost $20,000. The parent of the child would

claim it in the year that the adoption is closed. So even if the adoption takes more than one year, you would wait until the adoption is finalized. And that's when the credit can be claimed. Again, that's a non-refundable. It's about 20% of a credit, up to $20,000 of expenses. That can be claimed by one parent as well. All right. Let's switch gears a little bit. I want to talk about people working from home. There's a lot of people who are still doing that, but it's not so cut and dry. Give us an idea of what they can or cannot expense if they're working.

That's a very important question, because I think there's a lot of confusion and that people assume that they can claim a huge variety of expenses from working from home. So in the last couple of years, there's much more restriction about who can claim work from home expenses and what we can claim. So number one, you have to be actually required to work from home.

It can't be just an informal situation where you decided to work from home part of the time. There has to be actually a formal requirement that you are working from home. And if you are, assuming that you're an employee, I'm talking about an employee here, you can claim a limited amount, an amount limited to, I should say, the portion of your home that you are using as perhaps a dedicated work environment for your job. You can claim a portion of utilities, a portion of rent paid if you're renting, and certain other expenses. What I do find, though, is the amounts that are actually deductible,

once all of the multiplication has happened to reduce the amount to just the part of the area that you use to work in, the amount is not as large as perhaps we were expecting, but it still is worthwhile to claim. If you're a commissioned salesperson, so you're a commissioned employee, you can also claim a deduction for the portion of property taxes as well. I know time is ticking for a lot of people who've got their papers all scattered on the table,

so they're asking deadlines. What are the deadlines? What do we have to keep in mind with those? Okay, so the most important deadline, April 30th. In Canada, we do not have extensions or taxes are due on April 30th, unless if you're self-employed, you have until June 15th to file your tax return. However, yes. Any taxes that you owed would still be due on April 30th. You have to pay the taxes that you would owe April 30th.

If you're self-employed, you do have that small extension, if you will, until June 15th the file. One thing I just want to mention is that people often think, oh, I don't have to perhaps pay any taxes during the year. I just pay them all on April 30th. That could be true for somebody who is employed and has source deductions taken off of every paycheck. Perhaps you don't have a balance of tax owing, but you file your tax return. If you are self-employed or if you have investment income and you have an installment requirement, we really do have a pay-as-you-go system and you'd have to pay your personal tax installments

in the year that they're earned. Okay. Allie, we are going to leave it there. This was very informative. Thank you very much. Thank you for having me. I'm Jayne. Thanks for spending some time with us on The Rundown. We want this show to reflect you and what you care about. So what should we cover next? Let us know at tvo.org slash rundown feedback or drop us a comment on YouTube. Until then, I'll see you tomorrow.