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“And debt is like quicksand — once you’re in it, it’s even more diffi cult to get out.” This overspending trend is a serious provincial issue as well,


notes Lammam. In addition to Ontario’s massive debt, Alberta is expecting deficits until 2024. And while BC, Quebec and Saskatchewan aren’t in as much trouble as the other provinces when it comes to fi scal management, he says the country is on a problematic path forward. “During the last recession, [most of Canada] was in a balanced budget situation and had engaged in major tax relief,” says Lammam, noting Prince Edward Island as the one exception with a defi cit. “But this time we’re not in a sound fi scal state to weather the storm like we did in 2008.” Even without another recession on the horizon, Lammam


points to the fact that $62.8 billion paid annually on the interest on provincial and national debt (up from $60.8 billion in 2014-’15) is money not spent on social services and other pro- grams that Canadians value. That is more than government spends on annual pension benefits. In fact, according to Generation Screwed, the youth arm of CTF, our current debt could pay the post-secondary tuition of every student in Canada for 170 years. Given our aging boomers leaving the workforce and a shrink-


ing pool of taxpayers, Lammam says there is real concern about the kind of government programs (i.e., pensions and social services) that will be sustainable in the future and whether the next generation will be able to carry the debt we leave behind. In fact, some economists believe the next debt-paying generation will be forced to work longer hours and will still be unable to provide their children with the opportunities they had growing up — including post-secondary education and the ability to fi nance major purchases such as a fi rst car or home. Lammam also notes that while our federal government is


Source: OECD


pursuing defi cit spending that will purportedly drive long-term economic growth, only 20% is being spent on new infrastruc- ture. Of that 20%, most spending is going toward “social and green infrastructure” such as arenas and parks rather than building more effi cient transportation. “While some Canadians will derive value from [parks and arenas], it’s very unlikely they will spur long-term economic growth,” says Lammam. So where do we go from here? Alepin thinks our tax system is


in need of a major overhaul. To put things in perspective, while the share of government revenue derived from personal income tax has risen to 38% from 20% between 1955 and 2014, she notes that the proportion raised through corporate income taxes declined from 18% to 10% during that time. “Maybe cor- porate and personal income taxes, for example, shouldn’t have the same importance as they did in the last century because it’s now too difficult to tax with e-commerce and intangible wealth and tax havens,” she says. “We will always have these taxes, but maybe they would be part of a bouquet of ways we tax people that would also include green and tobacco taxes, among others.”


48 | CPA MAGAZINE | MARCH 2017


60 50 40 30 20 10 0


DEBT INTEREST PAYMENTS COMPARED WITH KEY SPENDING PROGRAMS 2014-’15


$ BILLION 60.8 $ BILLION 50.9 $ BILLION 62.2


All


Canadian gov’ts


INTEREST Source: Fraser Institute Alepin also expects that the reign of Donald Trump across the


border will be “a complete game changer” in international tax competition. “As tax advisers we have to understand that the US may start to look like a more tax friendly option for our clients if US corporate tax rates go down as promised,” she says. “To be true leaders, we should be promoting tax collaboration so we can fi nd solutions.” Alepin is so passionate about the subject, in fact, she founded Quebec-based TaxCOOP, the first neutral, international conference dedicated exclusively to tax competi- tion, now in its third year running. At a time of economic uncertainty around the world, Canada


should stay nimble, says Joy Thomas, president and CEO of CPA Canada. With our country’s economic fortunes susceptible to factors beyond our control, including the state of the global economy, fi nancial markets and oil prices, she says program spending must be closely monitored. “There is always uneasi- ness when a government turns to defi cit fi nancing,” she says. “It’s always important to have some fi scal room to respond to the unknown.” CPA Canada believes that strong management of govern-


ment fi nances, along with accountability and transparency, are crucial to ensuring that Canada can support essential pro- grams, fi nance its plans and debt obligations and minimize the burden for future generations. “Sound fi scal policy measures instil confi dence in consumers and investors, create opportuni- ties for growth and prosperity, and enhance the competitive- ness of Canada,” says Thomas. Fred O’Riordan, national adviser, tax services at EY in Ottawa,


DEBT


CPP & QPP


PENSION BENEFITS


Public K-12


EDUCATION (2012-’13)


Finland Israel


Netherlands Germany Slovenia Hungary Austria Canada


United Kingdom Spain France Ireland


United States Belgium Portugal Italy


Greece Japan


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