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A neutral tax system is one in which the government has the lightest possible touch on economic decisions

For added emphasis, Milligan, who edits the Canadian Tax Journal, rephrased the point. “A neutral tax system is one in which the decisions made by a corporation or an individual in a world where we have taxation are the same as the decisions that would be made in a world without taxation.”

Since Milligan’s Canadian Tax Journal helped lay the foundation for the Trudeau/Morneau reforms (see “Why the rich should revolt — and its not for the reasons they think”), it is not surprising that the Liberal reform package advocates neutrality. “Fairness and neutrality require that private corporations not be used as a personal savings vehicle for the purpose of gaining a tax advantage,” said a government brief. “Passive investments held within privately-controlled corporations should be taxed at an equivalent rate to those held outside such corporations.”

As more Canadians now understand, tax neutrality is the Maltese Falcon of Canadian tax policy, a gold standard that contains no gold. The Canadian tax system is not even remotely neutral as defined by Milligan or the government, and the announced reforms are a ruse that will do nothing to make it neutral. Because that’s not really the plan.

Exactly how much money is slithering around private corporations is unclear

The government claims that owners of private corporations — small entrepreneurs, doctors, farmers, lawyers, famous novelists, filmmakers — are using their corporate structures to gain a tax advantage. Money is being tucked into private corporations where it produces “passive” returns at low tax rates that are unfair to the rest of us.