Canadians Pay Higher Income Tax Than Workers in Most Other OECD Countries: Report

According to a recent report, Canadians across all income levels pay more taxes compared to residents of most other OECD countries worldwide. In 2022, Canada had the 5th highest combined top tax rate out of 38 countries, indicating that while it was more competitive than four countries, it lagged behind many OECD nations such as the United States, the United Kingdom, and Australia.

Japan, Denmark, France, and Austria ranked higher than Canada for tax rates within the OECD. The report also highlighted that five Canadian provinces were among the top 10 spots for the highest tax rates in the OECD, with Newfoundland and Labrador, Nova Scotia, Ontario, British Columbia, and Quebec leading the list.

Authors Jake Fuss and Grady Munro emphasized that the high income tax rates in Canada could deter professionals, entrepreneurs, and business owners from working and investing in the country, ultimately impacting the economy and its citizens negatively. They suggested that lowering personal income tax rates could attract and retain skilled workers and job creators, as well as encourage entrepreneurship.

Furthermore, the report pointed out that even individuals with incomes of CA$75,000 and CA$50,000 face uncompetitive marginal tax rates in Canada. The authors warned against continually raising taxes, as it could lead to unintended consequences as taxpayers seek ways to reduce their tax burden.

A survey revealed that a majority of Canadians believe they pay too much tax and that government spending is excessive. The report also mentioned upcoming tax changes in 2024 in response to inflation, including increased Canada Pension Plan contributions, Employment Insurance deductions, and the introduction of a second CPP tax.

It is evident that tax competitiveness is a crucial factor in Canada’s economic landscape, and policymakers must consider the implications of high tax rates on individuals and the overall economy.

Matthew Horwood and Jennifer Cowan contributed to this report.