At a time when Canada faces major fiscal and economic pressures, it is more important than ever that our tax system raise revenue fairly and efficiently while supporting productivity and growth.Sean Kilpatrick/The Canadian Press
John Oakey is the vice-president of taxation at CPA Canada. He is an author of a forthcoming white paper, “CPAs Renew Calls for a Tax Review: A Roadmap to Modernize Canada’s Tax System.”
Decades of piecemeal, reactive changes have left Canadian taxpayers facing uncertainty, inefficiency and unnecessary costs. New tax measures have long been layered onto an already complex framework without clear guiding principles. And while each addition may serve a specific purpose, collectively they have produced a system that is increasingly difficult to navigate and administer.
Accountants across the country see this every day: rules that are burdensome, unclear and inconsistent, creating confusion for taxpayers and strain on the Canada Revenue Agency. Calls go unanswered, processing delays persist and the Auditor-General has found the CRA provides incorrect information nearly 30 per cent of the time.
In a blistering report on Tuesday, federal Auditor-General Karen Hogan added to the criticism. She said the CRA answered fewer than one in five calls on time in the last fiscal year. And when Ms. Hogan’s office assessed the quality of responses, it found only about one in six answers for general queries about individual tax issues was accurate.
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This is simply not how a modern tax system should function.
At a time when Canada faces major fiscal and economic pressures – from an aging population to global competition and new spending demands – it is more important than ever that our tax system raise revenue fairly and efficiently while supporting productivity and growth.
Budget 2025 offers a critical opportunity to restore simplicity, fairness and certainty – principles that should anchor any tax system. Achieving that goal starts with a comprehensive, principle-based review of the entire tax system – something Canada has not done in more than 60 years.
Canada has conducted only two full-scale reviews: the Royal Commission on Taxation in the 1960s and the White Paper on Tax Reform in the 1980s. Both led to meaningful reforms, such as eliminating ineffective tax preferences and modernizing corporate taxation. Other countries, including New Zealand, Australia and the U.S., continue to conduct periodic reviews to ensure their systems remain fair, efficient and competitive.
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By contrast, Canada has allowed layers of complexity to build up, creating challenges for both taxpayers and administrators.
The bare trust reporting rules – proposed in 2018, expanded in 2022, then suspended days before filing deadlines – created enormous compliance costs with little practical benefit.
Mandatory disclosure rules now require taxpayers to report “notifiable transactions” without clear guidance on what exactly qualifies.
The underused housing tax, aimed at curbing foreign ownership of vacant homes, ensnared countless Canadians, forcing the CRA to waive roughly $2.5-billion in penalties.
Last year’s proposed increase to the capital gains inclusion rate – announced without draft legislation and later abandoned – left taxpayers and advisers in limbo for months.
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These examples point to a broader issue: Policies are often developed in isolation, without sufficient consultation, co-ordination or clarity of purpose, resulting in wasted time and resources that could otherwise support productive economic activity.
Sound tax policy starts with clear guiding principles. A well-designed system should be simple, fair, efficient and competitive – and provide taxpayers with certainty. It should be transparent, evidence-based and subject to regular evaluation.
In order to achieve this, the federal government must modernize the system to reflect today’s economic realities, including digitalization and global mobility; reduce compliance costs by simplifying outdated or redundant rules; and strengthen confidence through better consultation and clearer communication.
Every new proposal for taxation should include a clear policy rationale outlining expected costs, benefits and a plan for review. Draft legislation and CRA guidance should be released together so stakeholders can assess how new rules will work in practice. Tax expenditures – programs delivered through the tax system that cost billions in forgone revenue – should be evaluated regularly to ensure they deliver real public value.
Budgets are more than fiscal blueprints; they are opportunities to set direction. On Nov. 4, the federal government can do more than introduce new measures – it can commit to modernizing the very system through which those measures are delivered.