Striking a balance: pandemic recovery and fiscal sustainability
Policy Pillar: Finance and Taxation
Governments in Canada responded swiftly to the crisis of the global pandemic with programs to support Canadians and businesses and prevent further economic hardship. This spending, while vital, was also costly. The increased debt and deficit resulting from the COVID-19 pandemic response will present a challenge to government budgets for years to come.
The Government of Canada’s debt has surpassed the $1 trillion mark. This level of debt, over time, will result in fewer resources for public services and increased rates of taxation. Both will harm the Canadian economy and the business environment.
What should this mean for our fiscal future?
As the recovery allows, support programs should be right-sized and targeted so public resources have the greatest impact. This could mean programs tailored to specific sectors that have been most impacted by restrictions.
Canada also needs a plan to eliminate the deficit and reduce the debt to protect Canada’s long-term economic health. Concrete fiscal anchors and enduring performance measures will allow progress to be measured – not only in the short term, but also over decades. All government spending should be critically examined to ensure fiscal responsibility. We also need new and innovative approaches to help grow Canada’s economic productivity.
Canada ranks 18th out of 36 OECD countries in the 2020 International Tax Competitiveness Index rankings. The tax system in Canada is complex and has not been broadly reviewed since the 1960s. As a result, the Canadian tax system has not kept pace with the social, technological and demographic changes of the past 50 years. The average time businesses need to complete their returns continues to grow and Canada is falling behind other countries who are pursuing major changes. It is long overdue that an independent, non-partisan review addresses questions about tax efficiency and fairness. A competitive, simple, and fair tax system will result in savings for businesses, lower barriers to innovation, and increased attractiveness for foreign investment.
From challenge to change
The Calgary and Edmonton Chambers of Commerce developed steps the government can take to protect Canada’s long-term fiscal health:
Critically examine all government spending to ensure fiscal responsibility, with specific focus on finding efficiencies in recurring expenses.
Focus on key fiscal anchors over the long term and ensure strong balance sheets to avoid creating untenable future tax burdens.
Strive to increase economic productivity in order to accelerate economic growth.
By 2023, conduct a comprehensive, pan-Canadian independent review and deliver a report with recommendations on Canada’s taxation system in consultation with industry stakeholders and subnational governments, guided by principles of tax competitiveness, simplicity, fairness, and neutrality.
Protecting Canada’s fiscal future
This election, we encourage all Canadians to get involved in the issues and exercise their democratic right to vote. Together, Canadians have the ability to chart a fiscal path that is responsible, supports growth and transforms the challenges of our past to opportunities for a prosperous and sustainable future.
Read our platform to learn more about our policies and recommendations for finance and taxation and join the conversation.