Tax policy pauses show governments aren’t getting things right in the first place

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Photo by Brandon Bell /Getty ImagesWe independently select everything we recommend. Buying through us may earn us a commission, which supports our work.A relative of mine started building a garage several years ago. The site was levelled, gravel poured, rebar laid down and then everything stopped. The project, I was told, was paused. The money had run out and, frankly, so had the energy.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountA pause like that usually isn’t bad luck; it’s the bill for planning that should have been done before the first shovel went into the ground. Pause has also become one of the favourite words in Canadian tax policy.This advertisement has not loaded yet, but your article continues below.For example, British Columbia on Sept. 18 paused its poorly planned expansion of the provincial sales tax to accounting, engineering, architectural and other professional services, less than two weeks before it was to take effect on Oct. 1. The reason? Apparently, United States President Donald Trump. Four days later, Premier David Eby called a snap election two years ahead of schedule, again citing Trump.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againMeanwhile, the federal government introduced legislation to continue pausing the federal fuel excise tax to Jan. 31, with half rates in February and March and the full tax returning on April 1. The pause, in place since April, will cost about $5.3 billion this fiscal year. Alberta on Sept. 22 announced it will suspend its 13-cent-per-litre fuel tax from Oct. 1 to the end of the year.Three governments, five days, the same instinct.A pause or suspension may sound prudent since it suggests a government carefully stepping back to reassess, but it’s usually a tell that bad politics has trumped good policy. Either a tax was announced before it was properly thought through or a visible tax is being cut because voters notice it — sometimes it’s both.This advertisement has not loaded yet, but your article continues below.Start with visibility. Fuel taxes are effectively posted on every pump sign. The Department of Finance has even boasted that gasoline prices fell 11 cents per litre on the first day of the federal suspension earlier this year. That’s a political win you can see from the highway.Alberta’s case is more nuanced. Its fuel tax relief program uses a formula tied to oil prices, which is a better design than the federal government’s ad hoc extensions. But last quarter, the province opted for a rebate instead of pump relief and resisted calls to cut the tax for months before reversing course because, as Premier Danielle Smith said, Albertans would rather get relief directly at the pumps. Even a formula bends toward visibility.We’ve seen this before. The Stephen Harper government cut the GST to six per cent in 2006 from seven per cent and then to five per cent in 2008 despite widespread criticism from economists who said income or corporate tax cuts would do far more for growth. The GST was chosen because Canadians see it at every checkout. Nearly two decades later, no government has dared to restore it.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The carbon tax followed the same path, only faster. The federal government in 2023 paused the carbon tax on home-heating oil for three years. Less than 18 months later, the entire consumer carbon tax was gone.Now, look in the other direction. B.C.’s disastrous 2026 budget also paused indexation of provincial tax brackets and non-refundable credits for 2027 through 2030. That’s not a pause of anything a taxpayer will notice at the till. It’s a four-year tax increase delivered through bracket creep. The same soft word is used to cut visible taxes loudly and to raise invisible ones.There are also pauses that follow poorly designed measures and are announced before the details, costs and consequences were worked through, then delayed or abandoned once taxpayers and advisers exposed the flaws.For example, the 2024 increase in the capital gains inclusion rate was announced, deferred in January 2025 and then cancelled outright in March 2025. It never became law. Yet many taxpayers had already triggered gains, restructured their affairs and paid advisers based on a rule that never arrived.This advertisement has not loaded yet, but your article continues below.The trust reporting rules are just as bad. Bare trusts were exempted from filing for 2023, then 2024, then 2025 and the rules now return for taxation years ending after Dec. 31, 2026.Also, the federal government in 2022 introduced both the underused housing tax and the luxury tax on certain autos, aircraft and vessels. Three years later, both were scrapped, apart from the luxury tax on autos, by a government that called them inefficient and costly to administer. No kidding.B.C.’s PST pause now adds to the pile. Companies registered, updated their invoicing and adjusted their accounting systems, and none of that cost comes back. The province is now telling them to cancel their PST accounts.Every pause leaves someone holding the cost. Taxpayers and their advisers absorb the compliance work for rules that don’t last, the planning built on dates that shift and the uncertainty that delays real investment decisions.Don’t get me wrong: bad measures should indeed be cancelled, but they shouldn’t be introduced in the first place.Meanwhile, temporary measures escape the scrutiny that a permanent $5-billion decision would face in a budget. A suspension doesn’t have to be defended as permanent policy, even when it becomes one.This advertisement has not loaded yet, but your article continues below.The fix isn’t complicated, but it requires repairing a broken policy process. Do the policy work before the announcement, not after. If a tax measure is meant to be permanent, say so and cost it honestly in a budget.My relative’s rebar is still rusting on the gravel, a monument to the money, time and effort spent on something that should have been properly planned before it began. Canada’s tax system is increasingly dotted with its own rusting policies.Governments sometimes need to change course, but taxpayers shouldn’t routinely be handed the bill because they announce first and think later.Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, co-host of Canadian Tax Matters, a former chair of the Canadian Tax Foundation and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody. _____________________________________________________________If you like this story, sign up for the FP Investor Newsletter._____________________________________________________________We apologize, but this video has failed to load.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.