Canada's Current Tax System

Canada has a progressive taxation system with both federal and provincial/territorial components. Individuals pay income taxes based on a tiered structure, where higher incomes are subjected to higher tax rates. Canadian businesses also contribute through corporate taxes. The Goods and Services Tax (GST) is a federal value-added tax applied to most goods and services. Provinces have the autonomy to either integrate with the federal GST or impose their own provincial sales tax. The collected taxes are then allocated to various sectors like healthcare, education, defence, infrastructure, and social services, based on decisions made during the budgetary process in both federal and provincial/territorial parliaments.

How do Canadians feel about having more control over their tax allocations?

While no generalization can capture the sentiment of all Canadians, several surveys and public discourse suggest a mixed bag of opinions. Abacus Data Survey finds that 62% of Canadians describe Canada's tax system as unfair, and only 14% believe it is fair. This survey was conducted for the Broadbent Institute and the Professional Institute for the Public Service of Canada. It also reports widespread support for tax measures to reduce inequality and raise revenue, including 92% support for closing tax loopholes used primarily by the wealthy. Ipsos Poll for Global News poll data reports that 37% of Canadians want the government to lower taxes, and 22% demand higher taxes on the wealthy. Another Ipsos poll showed that 80% of Canadians believe governments should tax the rich more​​. Nanos Research Poll commissioned by CTV News and The Globe and Mail found that Canadians are indeed split on the issue of raising taxes for defence spending. The poll revealed that 19% support and 28% somewhat support increasing income tax for defence spending, while 31% oppose and 17% somewhat oppose it​​. The poll also noted that Canadians marginally favour spending more on defence over social programs to meet the contemporary challenges.

As Canadians we relish having direct control over where our tax dollars go, believing it would make the system more transparent and accountable. We feel it could bridge the gap between citizens and the government, fostering increased civic participation. Conversely, others worry about the potential pitfalls of such a system, fearing that essential but less popular services might face underfunding. Also, in our discussions, some expressed reservations due to the potential complexities in implementing such a system and the added administrative burden.

Examining different ways tax choice could be integrated into the Canadian tax system.

Given Canada's dual (federal and provincial/territorial) taxation structure, several models could be considered:

Partial Earmarking: Taxpayers could earmark a small percentage (e.g., 5-10%) of their taxes for specific sectors or projects. This way, most of the tax remains under traditional allocation while giving citizens some say.

Project-Based Allocation: Canadians could choose specific projects or initiatives they want to fund instead of sectors.

Hybrid Model: Combine both methods, allowing taxpayers to divide their choice between sectors and specific projects.

Voluntary Contribution System: Beyond their regular taxes, Canadians could have the option to contribute extra to specific causes or projects they're passionate about.

What legal hurdles might arise when trying to implement tax choice in Canada?

Implementing tax choice in Canada wouldn't just be an administrative challenge; it would also have legal implications:

Constitutional Concerns: Canada's Constitution Act, 1867, delineates powers between federal and provincial governments. Altering tax structures could raise constitutional issues, especially if it impinges on local autonomy in certain sectors.

Equity and Fairness: There could be legal challenges centred on equity. If certain sectors or projects receive disproportionate funding due to popularity, it could be deemed inequitable or discriminatory against less popular but essential services.

Implementation Legislation: New laws would need to be drafted, debated, and passed, both at the federal and provincial/territorial levels, to make tax choices a reality. This process can be lengthy and fraught with challenges.

Accountability and Oversight: New regulations would be required to ensure transparency, prevent misuse, and maintain accountability in the tax choice system. Ensuring compliance and managing potential disputes would also be a legal concern.