Tax loopholes cost Canadians billions: Canadians for Tax Fairness

“These tax loopholes overwhelming benefit high incomes earners and the wealthy, allowing them to pay lower rates of tax than ordinary Canadians do on their employment income” — Toby Sanger, executive director of Canadians for Tax Fairness

Ottawa (23 April 2019) — Canadians for Tax Fairness are raising concern about the cost of tax loopholes that largely benefit the wealthy. According to the tax expenditure report published last week by Finance Canada, the federal government lost over $24 billion in annual revenues from just 4 of the most regressive tax loopholes.

“These tax loopholes overwhelming benefit high incomes and the wealthy, allowing them to pay lower rates of tax than ordinary Canadians do on their employment income,” said Toby Sanger, executive director of Canadians for Tax Fairness. “Eliminating them could go a long way to paying for needed public services and reducing inequality. They’re also greater than the federal deficit this year.”

90% of benefits from tax loopholes goes to the wealthiest 10% 

The 4 examples below show how up to 90 per cent of the benefit from tax loopholes goes to the wealthiest 10 per cent of Canadians:

  • Taxing Capital Gains at half the rate of other income costs the federal government over $17 billion annually for both personal and corporate taxes. Over 90 per cent of the benefits on the personal side go to the top 10 per cent..
  • The Stock Option Deduction will cost the federal government an estimated $710 million this year, with well-over 90 per cent of the benefits going to the top 1 per cent, and 86 per cent going to men.
  • The Corporate Dividend Tax Credit will cost the federal government an estimated $5.6 billion this year, with over 90 pre cent of the benefits going to the top 10 per cent..
  • The Corporate Meals and Entertainment Expense Deduction allows businesses to deduct half the cost of expensive meals and entertainment expenses, including the price of private boxes at sports events, and will cost the federal government over $500 million this year. 

Even Trump administration has tougher rules

“Even the Trump administration tightened its Meals and Entertainment Expense Deduction this year, eliminating the deduction for entertainment expenses. Meanwhile, corporate executives in Canada can deduct the cost of spending at night clubs, country and golf clubs, cruises and vacations knowing that they can be tax subsidized,” said Sanger.

Revenue lost to tax loopholes shows federal government needs to be doing much more

Canadians for Tax Fairness commends the federal government for its transparency in publishing this report and the inclusion of a gender-based analysis of personal income tax measures and expenditures, which shows that these tax loopholes overwhelmingly benefit men. Closing these loopholes and using the revenues to fund affordable child care would go a long way to reducing inequalities.

The Liberal party promised to review and eliminate regressive and ineffective tax loopholes in the last election. They’ve made some limited progress, but much more needs to be done.

“We welcome recent pledges from the NDP and Liberals to tighten tax loopholes and hope all parties will make stronger commitments to eliminate expensive and unfair loopholes in the coming election—  and carry through with those promises,” concludes Sanger.