It’s not often that the Business Council of Canada, the nation’s most important lobby for big business, sees eye-to-eye with the Canadian Centre for Policy Alternatives, the left-leaning think tank. So this should tell you something about the sorry state of our tax system: Both groups are pointing to the need for sweeping reform.

True, the Business Council is looking for a lower tax burden on businesses, while the Centre for Policy Alternatives is seeking a system that will increase redistribution from rich to poor. But both groups recognize that the current system is far too complex, confusing and riddled with loopholes — that it’s crying out for a radical overhaul.

Fifty years ago, in 1966, the Royal Commission on Taxation led by Kenneth Carter published its six-volume report outlining the need for reform of the Canadian tax system. Although its more progressive recommendations were watered down, it was the last time we had a systematic study of our tax system and what ails it.

Sophisticated tax avoidance operations like the Isle of Man scheme have many Canadians convinced that there’s one tax system for the rich and another, more onerous one for the rest of us. The need for tax reform has never been more urgent.

Now we’re told the federal government is quietly looking at introducing some form of carbon tax, to be layered on top of an already tangled web of taxes and levies. It’s time to do again what the Carter Commission did — analyze the system from top to bottom with the aim of simplifying tax law and making it more effective.

When it comes to making the system simpler and more coherent, the Harper era truly was a lost decade. The Mulroney government bravely undertook a partial reform with the introduction of the GST in 1991 — but it paid a heavy political price in the election that followed. The Harper Conservatives took that as a lesson and carefully avoided necessary reforms that could cost it votes.

Instead, it stuck to doing politically expedient things: cutting the GST rate, establishing Tax Free Savings Accounts and introducing a plethora of boutique tax breaks for commuters, volunteer firefighters and kids’ ballet lessons. The result was a tax system that was both weaker and more complex, while doing little to encourage the growth of a more competitive economy.

Eliminate these tax breaks for the few and you can reduce income taxes for all, or use the money to finance programs that actually do some good. Eliminate these tax breaks for the few and you can reduce income taxes for all, or use the money to finance programs that actually do some good.

If you want to see how screwy the tax system has become, go to the Finance Canada website. In February, the department published a comprehensive review of federal tax expenditures, tabulating the 200 or so separate preferential tax rates, exemptions, deferrals and tax credits that have turned the tax system into a maze of loopholes. Every time the government gives out a tax credit for some activity, or gives a tax break for another, it costs the treasury money. The total cost of these tax expenditures is a staggering $157 billion a year.

There are plenty of big ticket items on that list of tax expenditures — like the non-taxation of capital gains on the sale of primary residences (cost: $5.3 billion per year), or the charitable donation tax credit ($2.9 billion). Both are so well entrenched in the Canadian psyche that it would be suicidal for any government to tamper with them. But there are dozens of questionable credits that drain the public purse with no visible benefit.

Take the Public Transit Tax Credit, introduced by the late Jim Flaherty in his first budget in 2006, which costs $205 million annually to provide commuters with an average $100 each in a non-refundable tax credit. Independent research has shown it has had zero impact on transit ridership — except perhaps to increase the number of commuters buying monthly passes (which are eligible for the credit) rather than daily fares (which are not). The credit has never bought a single bus or added a kilometre to a subway line — but it did allow the Harperites to claim they were doing something to boost mass transit.

The list of business credits is also loaded with questionable uses of public funds. Take the Mineral Exploration Tax Credit for Flow-Through Shares. Introduced as a temporary measure in 2000 to help junior mining firms, it has been earmarked for cancellation repeatedly – but always seems to get a last-minute reprieve. That was the story throughout the Harper years and again this March, when Finance Minister Morneau extended the break for another year “given this is a challenging time for junior mining companies.” (It’s always “a challenging time” for junior mining companies when they turn up with their begging bowl at Finance.)

Then there’s the Labour-Sponsored Venture Capital credit, a tax gimmick with a questionable record of creating cutting-edge enterprises which the Harper government mercifully decided to phase out — only for the Liberals to revive it in the recent budget, presumably to win votes in Quebec. The cost will be $815 million over the next five years.

Eliminate these tax breaks for the few and you can reduce income taxes for all, or use the money to finance programs that actually do some good.

Finance Minister Morneau has promised a review of tax expenditures but, so far, he’s been coy about providing details. But the review shouldn’t stop there.

Wayne Easter, the Liberal chairman of the Commons Finance Committee, thinks any reform should go beyond tax expenditures to include a broad review of taxation, including the level of the GST. And he believes the review should be taken out of the hands of MPs and public servants and given to an independent group of experts.

It’s an idea worth pursuing. Surely we can afford a thorough look at Canada’s tax system once every half century.

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