Will Tax Haven or Tax Hell Await? Juggling the Jesters of Western Economies

Living comes at a cost, and for a society to prosper, we must be willing to invest in it.

Reducing or cutting taxes did not — empirically — increase revenue; hence, it is a preposterous notion. It is unreasonable to think that the government can operate without taxes, particularly in Western economies. We accepted this fact since 1917.

Tax is one apparent solution to maintaining a nation afloat, but it’s by no means the only one.

Governments can have a plethora of revenue sources in lieu of imposing taxes on residents — if they want to or can strategically create one.

But merely possessing an option does not inherently imply that we should accept or be content with it. In a CPA Canada report, Canada’s Tax System: What’s so Wrong and Why it Matters (2018), they called for the creation of a 21st-century tax system that is simple, predictable, fair, efficient, and transparent, with internationally competitive tax rates, where everyone pays their share. Our current tax system is outdated and has not undergone a comprehensive review since the mid-1960s.

Although there have been promises here and there, they have fallen short in implementation and strategic planning. The tax system has undergone minor modifications but just exacerbated issues such as uncompetitive personal tax rates, compliance challenges, inadequate tax mix, decline in SR&ED benefits, lack of innovation, and high complexity of tax expenditures.

According to Risk Concern (n.d.), taxation’s primary purpose is to provide necessary funds to the government while reducing inequality in the country. The catch is relying on an old system in a modern world hinders its effectiveness in addressing contemporary challenges. How would the old way work in the modern world? That is just one thing. Just as obsolete technology becomes inefficient, clinging to old ways in our tax system hinders its effectiveness in addressing contemporary challenges.

The second thing is mirroring the impact that increasing revenues would have on the balance sheet. The International Monetary Fund recommends achieving the lowest possible cost, an appropriate mix of outputs, and sustainable levels of aggregate expenditure. Such measures can aid in improving the government’s fiscal health with minimal impact on taxpayers. In the long term, the effects are notably more favorable than just raising taxes. Taxing, borrowing, or inflating the currency all have substantial long-term economic consequences, unlike simple thrift, which does not.

Bibliography

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Chartered Professional Accountants of Canada. (2018). Canada’s Tax System: What’s so Wrong and Why it Matters. Chartered Professional Accountants of Canada.

International Monetary Fund. (n.d.). Unproductive Public Expenditures A Pragmatic Approach

To Policy Analysis. In International Monetary Fund. Retrieved February 4, 2024, from

https://www.imf.org/external/pubs/ft/pam/pam48/pam4801.htm

Poloz, S. (2023). Stephen Poloz: Here’s how to increase government revenues without raising taxes. In The Hub.

https://thehub.ca/2023-05-11/stephen-poloz-heres-how-to-increase-government-revenues-without-raising-taxes/

Risk Concern. (n.d.). What Is the Alternative to Income and Corporate Taxes? Can a

Government Be Run Without Taxes? In Risk Concern. Retrieved February 3, 2024, from

https://www.riskconcern.com/post/what-is-the-alternative-to-income-and-corporate-taxes

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Strategic Risk to the Economy and the Country of Higher Tax Rates and Antibusiness

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