Canada must reform its outdated and complicated tax system, according to a new book, “Tax Reform in Canada: Our Path to Greater Prosperity”, released Wednesday by The Fraser Institute.

The book, with contributions by Canadian and foreign economists, contains a blueprint for reform of Canada’s tax system.

“The present system is unnecessarily complex, as most Canadians will be finding out once again as they file their annual returns. More importantly, it is outdated because it does not make use of new insights about the incentive effects of different taxes,” said the book’s editor, Herbert Grubel, senior fellow at The Fraser Institute.

Suggested reforms include the removal of all limits on RRSP savings, which would increase incentives for Canadians to save for their own retirements.

In addition, the authors advocate the replacement of the present personal and corporate income tax structure with an integrated flat tax. They argue that the flattening of the personal income tax structure and overall lower rates would stimulate work effort.

Another suggested reform is the elimination of the corporate capital tax. “If Canada does not eliminate the corporate capital tax and get rid of its own system of taxing business profits twice, we can expect a further fall in the value of the Canadian dollar as more foreign and Canadian dollars are diverted to investment in the United States,” said Grubel.

The book also presents evidence on the effects of recent tax reforms on economic performance, using Ireland, Alberta, and Ontario as examples. In all of these jurisdictions, lower taxes combined with tax reform and other measures liberalizing the economy, have resulted in higher economic growth and ultimately higher tax revenues.

http://www.newswire.ca/releases/March2003/12/c9652.html