A new, one-time tax on Canada’s wealthiest families could add billions of dollars to the federal government’s coffers, according to a report by the federal fiscal watchdog.
A three per cent tax on Canadians with a net wealth of more than $10 million, and a five per cent tax on net wealth of more than $20 million, could bring in as much as $82.5 billion over five years, according to a report released Thursday by the parliamentary budget officer (PBO).
But the likelihood of collecting that much from the extremely wealthy is unlikely, the PBO says. If a portion of Canadian families reported a 15 to 20 per cent reduction in their wealth, the amount collected would be $60.7 billion. With a reduction of 35 per cent, the amount generated drops to $44.9 billion.
The spending watchdog is assuming that some Canadians will respond to the tax by reporting less wealth than they actually have, and it provided a range to illustrate that. The 35 per cent reduction is an estimated behavioural-response rate based on previous PBO reports, which include findings from the Internal Revenue Service in the U.S.
The report says enforcement will be critical to determining how families react to the tax, noting it’s often hard to accurately calculate someone’s wealth.
Assuming no avoidance or evasion, the tax would apply to more than 87,000 families with a net worth of over $10 million. The number drops by nearly half when assuming some families will drop their reported wealth by 35 per cent.
The report was commissioned after Liberal MP Nate Erskine-Smith asked for the information in February.
The money generated from the tax could be used to offset the costs of the pandemic and climate-change measures, or to pay for part of the government’s work on Indigenous reconciliation, Erskine-Smith told iPolitics, adding he wanted the report because unfairness in society must be remedied.
“There’s been this call to arms to say, ‘We’re all in this together,’ and yet you see so many people who have struggled to get by,” Erskine-Smith said.
In fact, poor and racialized Canadians have been disproportionately harmed by the pandemic, he said, while “those who are already significantly well-off” have benefited disproportionately.
“This (tax) doesn’t solve all those problems, but I think it helps to begin a conversation about … fairness.”
Erskine-Smith plans to bring the report, and other documentation on a wealth tax, to his colleagues, hoping it starts that conversation. He said he’s not aware of any previous governments implementing such a tax.
Support for a wealth tax has risen in Canada. About eight in 10 Canadians were in favour of a one per cent tax on their fellow Canadians with more than $20 million in assets, according to a November 2020 survey by Abacus Data.
The NDP also supports a wealth tax.
Finance Minister Chrystia Freeland’s press secretary, Katherine Cuplinskas, said the Liberal government has taken measures to make Canada fairer, including by cutting taxes for the middle class and increasing personal income taxes for wealthy Canadians.
“We are committed to ensuring that everyone pays their fair share of tax, so we continue to have the resources needed to invest in people and to help our economy recover from the COVID-19 pandemic,” Cuplinskas said.
“That is why we committed in the budget, and in the fall economic statement, to: implementing a tax on multinational digital giants; introducing a luxury tax; limiting stock-option deductions in the largest companies; and implementing a tax on the unproductive use of domestic housing that is owned by non-resident non-Canadians.”
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