Canada’s federal government has famously pursued a tech-friendly “innovation agenda” that thus far has included funding for five tech-based “superclusters” and a contest encouraging cities across the country to digitally transform themselves – but according to the Canadian Advanced Technology Alliance (CATA) its taxation policies have yet to follow suit.
This week the Ottawa-based industry association announced its latest campaign, a “Call for Creating Canada’s 21st Century Tax Commission.”
Simply put, CATA wants business leaders from across the spectrum, both within tech and without, to submit a paragraph to its website explaining why they believe an official discussion is needed about tax policies in the 21st century.
“The signal we get is that there is a great deal of confusion about the tax regimes, both for personal and business, that we have in place in Canada,” CATA CEO John Reid tells ITBusiness.ca. “And there’s frustration that things get tweaked instead of re-engineered to fit where we’d like to see Canada go into the future.”
That future, he says, could both include mastery of and is already being shaped by emerging technologies such as blockchain, artificial intelligence, and digital commerce – but requires, among other things, an updated public policy framework developed in collaboration with the private sector. (CATA is fond of pointing out that among its peers, Canada is far from being an “innovation nation.”)
“The government doesn’t have a good track of amending its tax policies,” Reid says. “Look at when it tried to amend the small business tax – there are always efforts to tweak one policy or another and they always leads to more confusion.”
“Instead, let’s follow the model of 55 years ago and create a nonpartisan group that lays out what our tax policy should look like to deliver 21st century success,” he continues. “Obviously it can’t be adopted immediately, but at least it will create a path that people will understand.”
What CATA’s asking for
At the moment, CATA’s proposed terms of reference for the sought-after commission, which can be found on its website, include:
- Comparing Canada’s tax regime with other nations, including research on their administrative models, methods of innovation support, and treatment of intellectual property;
- Determining which current tax and administrative models successfully support competitiveness, and how they can be used to support a 21st Century economy, with particular attention paid to the evolution of U.S. tax policy;
- The need for targeted and general tax cuts that support businesses;
- The redeployment of tax incentives that support the Canadian economy’s transition from one based on resources to one based on “industries of the future”; and
- Establishing the well-being of families as a priority for tax cuts.
CATA senior vice president of tax, finance, and advocacy Russ Roberts says an examination of recent U.S. tax policy changes and their implications should be especially high on the list, along with frank analysis of how effective the government’s current innovation-based initiatives have been.
“The government is putting great effort into shifting the way innovation policy is delivered,” Roberts tells ITBusiness.ca. “But it also opens up the question of why we aren’t achieving the type of growth from the IP we’re creating, which is showing up now across a lot of discussions.”
CATA’s position, Roberts says, is that the lack of growth can be at least partly attributed to the design of Canada’s tax system, which prioritizes startups and small businesses at the expense of the wider community.
“You can’t achieve the type of growth we need by putting more money into the bottom of the system,” he says. “You need to involve the business community itself if you want to earn American-sized rewards here at home.”
“That’s why we need a third-party commission that puts this discussion into the hands of experts who can solicit and carry out a good public discourse, and bring useful solutions back to the government that could improve returns on the very significant investment in intellectual property that this country creates,” he continues.
Reid echoes Roberts’ assessment, calling CATA’s campaign a call for “a private sector approach to what the government should be doing.”
Here’s what leaders are saying so far
Among the business leaders contributing to CATA’s campaign are Mindbridge Ai CEO Eli Fathi, who calls a 21st-century tax commission “super important” to resolving Canada’s economic issues
“The economy is going to face a major transformation over the next few decades,” Fathi told CATA. “The availability of new products based on new technology will significantly increase overall productivity while reducing the number of people needed to perform these tasks. Kudos to your team for taking on this highly important advocacy.”
Roberta Fox-Lawson, chair and chief innovation officer of Fox Group Technology and founding and interim CEO and CTO of Canada Suicide Prevention Services, echoed Fathi’s assessment, calling 21st-century tax reform a “critical” component of transitioning to “a human capital-based economy that also struggles to get access to much-needed capital.”
“Companies that provide services based on human output – i.e. consulting, integration, project management services – have struggled long and hard to get investment capital to grow,” Fox told CATA. “As more and more innovative solutions involve not products, but services delivered by people, it imperative to change the rules to enable the tax benefits to match.”
eQuoshift co-founder and co-CEO (and former president and CEO of Scotiabank subsidiary Tangerine) Peter Aceto, meanwhile, told CATA that while Canada enjoys “immense potential coming from our technology, innovation and entrepreneurial sectors,” there are challenges inherent to harnessing these sectors to their full benefit.
“I have seen in many countries around the world how taxation policies can help these sectors flourish, leading to greater tax revenues,” Aceto wrote in his testimonial. “Our government’s job is difficult. Balancing all of the interests and considering global best practices is complex. It is critical that we establish a tax commission to find the optimal path forward.”