The Canadian Chamber of Commerce is calling on the federal government to provide Canadians with a temporary GST/HST holiday to help lead the economy out of the Covid-19 pandemic.
“We think it’s a very interesting policy carrot to potentially mobilize private capital for economic recovery and local business stabilization as well,” said Patrick Gill, senior director of tax and financial policy with the Canadian Chamber of Commerce, in an interview. Gill noted that Germany, France and the U.K. instituted temporary value-added tax holidays in response to the Covid-19 pandemic.
The proposal was one of 30 recommendations made by the business lobby group in a release on Tuesday. The proposals are based on the work of a panel of tax experts the chamber assembled in July to examine broad-based tax reform.
The chamber’s recommendations represent “short-term actionable reforms” that the Canadian government can make now to help businesses and individuals during the pandemic, Gill said.
A GST/HST holiday would spur spending, helping local small- and medium-sized enterprises in particular, Gill said. Eliminating the GST/HST for one calendar quarter would cost the federal government about $9-$10 billion in forgone tax revenue, Gill estimated, “but the economic multiplier effect could be very impactful.”
Alternatively, the government could target a GST/HST holiday for the sectors most in need, such as tourism, retail and restaurants, he said.
In addition to a temporary GST/HST holiday, the chamber called on the feds to help Canadian businesses by allowing 100% deductibility on capital expenditures in the year incurred; simplifying the tax-on-split-income (TOSI) rules; increasing the lifetime capital gains exemption limit; and making childcare an eligible business deduction, among other recommendations.
The chamber also called on the government to help individual Canadians by introducing automated tax filing; eliminating non-refundable tax credits in favour of boosting the basic personal tax credit; and enhancing the deduction for childcare expenses.
The chamber’s tax panel, which consists of eight business and academic experts, conducted a series of roundtable consultations between August and November with over 450 participants. The panel plans to publish a comprehensive report early next year, which will set out ideas for long-term structural reform of Canada’s tax regime.
“Reforming Canada’s tax system can help the economy recover, and our tax panel experts have provided some initial steps that can be taken right now,” said Perrin Beatty, president and CEO of the Canadian Chamber of Commerce, in a release. “Canadians and the businesses employing them need our government to build a competitive and growth-focused tax system, because any true recovery must, and inevitably will, be led by business.”