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Finance Minister Jim Flaherty stands in the House of Commons during Question Period.FRED CHARTRAND/The Canadian Press

Much has already been written about Jim Flaherty's years as Minister of Finance in the few days since he resigned. However, little has been said about what might be his greatest legacy: A slow and deliberate effort to broaden the corporate tax base and eliminate so-called "loopholes" and tax preferences. These moves have allowed for a reduction in corporate tax rates that, together with other changes to the tax system, have made Canada's corporate tax system one of the most competitive in the world.

Mr. Flaherty pursued "fiscal integrity" or "loophole closing" with almost religious fervour. In his 2013 budget, he included an unusual item – a pamphlet that touted more than 75 measures introduced since 2006 aimed at "improving integrity and closing tax loopholes." This shouldn't be a big surprise from the minister who was willing to take the heat of closing down income funds almost a decade ago – which was politically risky, but good tax policy. These efforts have not only made the Canadian system more competitive, they have also enhanced the economic neutrality of the corporate tax system. Economic neutrality – or minimizing the extent to which tax considerations skew economic decision making – has traditionally been a key component of tax policy making in Canada.

These efforts have also contributed to the ability to reduce the general federal corporate income tax rate from about 29 per cent in 2000 to 15 per cent in 2012, and the establishment of a 25-per-cent target for the combined federal-provincial general corporate income tax rate, down from combined rates that exceeded 40 per cent a decade ago. They also include the elimination of the federal corporate capital tax in 2006, and Mr. Flaherty's successful efforts to persuade the provinces to eliminate their general capital taxes. Tariffs on imports of manufacturing inputs and machinery and equipment were also eliminated on Mr. Flaherty's watch. These and other improvements resulted in Canada having the lowest marginal effective tax rate on new investment among G7 countries (before British Columbia de-harmonized its sales tax).

Improvements in tax administration have reduced the compliance burden imposed on taxpayers in the business sector. These include, in particular, the Canada-Ontario Tax Collection Agreement that provided for the single administration of corporate income tax in Ontario by the Canada Revenue Agency, rather than by separate federal and provincial administration. This, combined with harmonization of the sales tax system in Ontario, significantly reduced annual compliance costs for taxpayers carrying on businesses in Ontario.

A recent joint study by the World Bank, International Finance Corporation and PricewaterhouseCoopers, analyzing the ease of corporate tax compliance in 189 countries, placed Canada in the top 10 – the only G7 country to place that high. The U.S. was ranked 64th, illustrating yet again that while we in Canada must always be aware of tax developments in the U.S., we shouldn't necessarily look southward for inspiration. (Some have joked that the U.S. has been economically successful in spite of its tax system, not because of it.)

Some have criticized Mr. Flaherty for introducing the various "905" tax credits for such items as children's arts and athletics, and public transit. And yes, these credits are better politics than they are policy. But the reality is that they are small in the greater scheme of things, and they are personal tax credits. On the corporate tax system, Mr. Flaherty can be proud of his legacy.

Tim Wach is a tax partner with Gowling Lafleur Henderson LLP.

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