It seems easy to say that the current Canadian income system is too complex, but reforming the system could prove to be a challenging endeavour, tax experts say. Veldhuis points out that an upfront exemption amount also means that the tax system is still progressive because the more you make, the higher the amount you pay. Proponents of the flat tax also say providing a large upfront exemption amount would help lower-income Canadians because they would have to pay little, if any, tax. Unleashing that entrepreneurial spirit, so the argument goes, will create more investment, jobs and opportunities which will, in turn, increase government tax revenues. And what you’re telling them is the more successful you become, the more and more we’re going to penalize you," Veldhuis says. "You’re sending a signal to young, aggressive Canadians who want to take risks, who want to start businesses, who want to save and invest. The current system of graduated rates takes a larger percentage of a person’s income the more money they make, and this is a disincentive for hard work, he says.
He says a flat tax would increase the incentive for Canadians to work, earn more money and, in turn, invest that money back into the economy. Opponents, on the other hand, say it shifts the tax burden onto lower- and middle-income earners.įor Niels Veldhuis, senior economist with the Fraser Institute, the argument for changing the tax system isn't about burdens but about productivity. People who have been pushing for a flat tax system says it is a simple and fair alternative that, if set up properly, could maintain existing government revenues. But one of the mostly commonly advocated versions would see the complete elimination of all credits, exemptions and graduated rates based on income in favour on just one rate, along with an upfront deduction amount. Proponents say a flat tax system would reduce the time it takes to fill out a return and, for the most part, eliminate the need to consult - and pay - a tax professional like an accountant or lawyer.Ī flat tax can come in a number of different forms of varying complexity (as in all matters tax-related, it seems).
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