As Trump readies for CUSMA review, his administration acknowledges support for preserving continental free trade
SCREENSHOT
As competition for global capital sharpens, Canada needs to review and modernize its tax system to remain internationally competitive, according to a new policy brief that warns the country is falling behind peers on investment, productivity and growth.
The report, Meaningful Tax Reform: The Missing Link in Canada’s Growth Agenda, argues that while governments have moved aggressively on project approvals, housing, defence procurement and regulatory reform, tax policy has been left largely untouched — a gap that risks undermining the broader push to restore confidence in Canada as an investment destination.
“Canada is making a hard turn toward a growth agenda,” authors Mike Jancik and Rob Jeffery write, but one element is missing. Without meaningful tax reform, they say, efforts to attract capital, talent and major projects will be diluted at a time when global investors have more choices than ever.
The Deloitte report points to weak economic performance as a warning sign. Over the past decade, inflation-adjusted GDP per capita has essentially flatlined, while business investment has lagged badly behind competitors. OECD data cited in the report show business investment per worker in Canada fell 15% between 2014 and 2023, while it rose 21% in the United States and 11% across the OECD as a whole.
That gap matters in an international context where the United States, after years of pro-investment tax policies, has become a magnet for capital. The report notes that investment decisions are “sensitive to both the structure and level of taxation,” especially as tariffs and geopolitical uncertainty push companies to reassess where to deploy capital.
Despite this backdrop, the federal government’s first budget under its Canada Strong agenda made only modest, incremental changes and was “silent on more meaningful tax reform,” a missed opportunity given the scale of the challenge, the authors argue.
Business confidence appears to be eroding. A Deloitte survey conducted in November 2025 found only 14% of business leaders rated the government’s handling of the tax burden on business positively, while 61% rated it negatively.
The report criticizes Canada’s heavy reliance on taxes that discourage work, saving and investment, alongside many credits and exemptions. As of 2025, Canada had nearly 300 tax expenditures, contributing to complexity and compliance costs. The Income Tax Act has grown from just six pages in 1917 to nearly 3,700 pages today, the report notes.
The economic consequences are well known, the authors argue, invoking a blunt reminder from former U.S. Federal Reserve chair Alan Greenspan: “Whatever you tax you will get less of.”
They also highlight Canada’s high marginal personal income tax rates compared with the United States, calling this a disadvantage in the global competition for skilled workers. Canada now has the fifth-highest marginal tax rate among OECD countries, the report notes.
Ireland, Estonia and Denmark are cited as jurisdictions that aligned tax policy with strategic priorities and reaped gains in productivity and living standards. Canada, the authors say, needs its own approach.
The report calls for the rapid launch of an expert tax reform panel, with a mandate broader than corporate taxation alone and a timeline of 12 to 18 months. “Piecemeal policies won’t do the trick,” the report says, warning that inaction will mean slower growth, weaker revenues and a declining standard of living in an increasingly competitive global economy.
“We can no longer afford to treat tax reform as an afterthought; it is integral to any national retooling of the economy. In today’s circumstances, the cost of inaction amounts to far more than just a missed opportunity,” the report says.
