Will Ottawa listen to loud calls for tax reform in the budget?

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Photo by HYUNGCHEOL PARK/PostmediaThe federal government will table its 2026 federal budget next week on November 5 and there’s no shortage of ideas that have been put forward by various special interest groups, think tanks, individuals and corporations. In fact, this year, the House of Commons Standing Committee on Finance received 1,355 briefs as part of its annual pre-budget consultations, and, if you’re so inclined, you can read each of them online.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 AccountThis advertisement has not loaded yet, but your article continues below.The committee summarized its recommendations in a report presented to Parliament in late September, which contained 130 recommendations. Of these, only seven of them related to taxation. But the first one, recommending broad-based tax reform, stands out.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 againThe committee recommended that the government “undertake a comprehensive review of Canada’s tax system to improve productivity, economic growth, and competitiveness by gradually reducing taxes on work, savings, entrepreneurship, and investment, while evaluating fiscally neutral reforms that place greater reliance on consumption-based taxation and provide enhanced protections for low-income Canadians through refundable tax credits and targeted income supports.”They’re not the only ones asking for tax reform. This week, the Chartered Professional Accountants of Ontario (CPA Ontario), the provincial regulatory body, echoed this recommendation, and is leading a national coalition in calling for comprehensive tax reform.This follows CPA Ontario’s Oct. 2025 report, Tax Reform for Growth in Canada, in which it laid out the case for tax reform, along with various recommendations. The organization is hoping that a full review of our tax system will consider a “revenue-neutral shift in the tax mix, reducing reliance on economically harmful taxes (e.g. income tax) while expanding the role of consumption taxes.”This advertisement has not loaded yet, but your article continues below.CPA Ontario is urging the government to simplify the overall tax system by eliminating niche tax expenditures that add complexity without clear economic benefit, capping the combined top marginal personal income tax rate at 50 per cent, reducing the number of personal income tax brackets and better aligning income bracket thresholds with our OECD peers “to retain and attract talent.”Here are a few of the more interesting personal tax recommendations culled from various pre-budget submissions.Simplified tax creditAmong the recommendations contained in The Growth Imperative: The C.D. Howe Institute’s 2026 Shadow Budget, would be the introduction of a simplified personal income tax credit. This idea was part of the Institute’s ‘Big Bang’ Tax Reform project, released in early 2026.According to the Institute, this new optional non-refundable simplified tax credit would “reduce complexity and improve transparency” by replacing numerous existing deductions and credits. The simplified credit amount would be set at $10,000 and added to the existing basic personal amount, which is currently $16,452. As a result, individuals could earn more than $26,000 tax-free.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.This new, simplified credit would be optional. Tax filers could choose to either claim the $10,000 simplified credit or retain access to all existing credits by forgoing it.A limited set of targeted measures would remain within the simplified system, including: the basic personal amount (along with any unused amount transferred from a partner or child), the new simplified tax credit, Canada Pension Plan/Québec Pension Plan and Employment Insurance contribution credits, disability and caregiver credits, the charitable donation credit, and federal dividend and foreign tax credits.On the deductions side, those who elected the simplified credit would still be able to deduct registered retirement savings plan (RRSP) and registered pension plan contributions, spousal support paid, CPP/QPP on self-employment income, 50 per cent capital gains inclusion and select employment and business-related deductions.But, in return for claiming the simplified credit, taxpayers would forgo other provisions, including: pension income splitting; the employment credit; union and professional dues; childcare expenses; moving expenses; the lifetime capital gains exemption; the tuition credit; age and pension credits; the volunteer firefighter credit; home accessibility and home buyers’ credits; medical expenses and refundable medical supplement, among a few others.This advertisement has not loaded yet, but your article continues below.The Institute added that by reducing line items and eligibility calculations, the simplified option would ease the tax filing burden for many Canadians, lower their compliance costs and facilitate tax-filing automation by greatly increasing the number of people with basic tax returns. This could also help with the government’s efforts to expand automated tax-filing options for low-income Canadians. The Institute expects more than 90 per cent of filers would choose the simplified credit rather than itemizing individual deductions and credits, which could ultimately “curb the tendency of elected officials to introduce narrowly targeted tax preferences as tools for political gain or broad policy objectives, fostering a more neutral tax system.”A similar proposal by the Joint Committee on Taxation of The Canadian Bar Association and CPA Canada was submitted last month. That committee recommended three prescribed standard personal amounts (single, married/common-law and an age 65 supplement) in lieu of a specified group of existing non-refundable tax credits.This advertisement has not loaded yet, but your article continues below.Indexation of various personal and business tax amountsIn August, the Society of Trust and Estate Practitioners (Canada) recommended that the federal government review and update various dollar thresholds in the Income Tax Act that haven’t been indexed to inflation for decades. Inflation has significantly reduced their real value. Examples include the registered disability savings plan contribution limit (stuck at $200,000 since its introduction in 2008), the foreign assets threshold for T1135 reporting requirement purposes (set at $100,000 since 1998) and the child care expense limits of $8,000 for kids under age 7, and $5,000 for children aged 7 to 16 (unchanged since 2015).Retirement savings plansFinally, in the area of retirement savings, the Conference for Advanced Life Underwriting (CALU) has proposed several measures to modernize Canada’s registered saving regimes. Specifically, CALU is calling on the government to update the registered plan rules to better support the financial needs of those saving for retirement and retirees by allowing unused RRSP contribution room to be annually indexed to partially compensate for the loss of tax deferred savings due to delayed contributions resulting from other financial priorities.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.CALU would also like to see the age at which RRSP contributions can be made to be extended to age 75 from 71, and similarly defer the requirement to convert an RRSP to a registered retirement income fund (RRIF) to age 75. It also recommended modifying RRIF payout requirements by allowing RRIF holders to exclude up to $180,000 (indexed annually to inflation) from the application of the RRIF minimum payment formula until an individual reaches the age of 85.The Canadian Forum for Financial Markets (CFFiM) went even further in its pre-budget submission, recommending that the RRSP limit be increased to 30 per cent of earned income from 18 per cent, lifting the current maximum annual contribution room to $56,350 from $33,810. It argued that the 18 per cent cap dates back to 1992 and rests on demographic and economic assumptions that are now outdated.It also wants the RRSP to RRIF conversion age increased to 74, since life expectancy at 74 today (13.9 years) is roughly equivalent to life expectancy of 71 in 1992 (13.7 years), when the modern RRIF calculation was set. The CFFiM is also calling for mandatory RRIF minimum withdrawal rates to be eliminated altogether.We apologize, but this video has failed to load.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.