At The Main Street Journal, we’re concerned that large organizations such as the CD Howe Institute, the Globe and Mail, and KPMG are pushing changes to our tax system that would reduce personal and corporate tax rates in favor of increased GST.
The Globe and Mail Published on September 25, 2026 – Matt Lundy led The Globe and Mail’s major investigative and special reporting series “The Tax Tradeoff”. This multi-part series explored Canada’s tax regime, examined how high taxes impact business competitiveness, productivity, and personal wealth, and outlined potential ideas for national tax reform. We’d point out that his background is neither in tax nor in economics. While we recognize the importance of Canada’s largest businesses which function in the same way that Big Banks, Big Box stores and family-owned grocery stores do.
Effectively they are like the ‘anchor tenants’ to the Canadian ‘shopping centre’. However we have to be careful if we believe that what is in their interests is necessarily in the interests of Canada’s broader economy. Consumption taxes are clearly regressive. The justification is that reducing tax complexity, and increasing tax competitiveness, encourages investment. The last time corporate tax rates were significantly reduced between 2000 and 2009, then Bank of Canada Governor Mark Carney pointed to a ‘dead money’ effect.
Today, Canada’s corporate tax rates are now broadly competitive with our counterparts in other G7 countries. This is particularly true for small business corporations, which benefit from our generous corporate small business deduction. Large organizations look jealously at the SBD and suggest that it adds complexity to our tax system. Their solution is to offset GST HST increases with new GST HST credits, which will further increase complexity for our smallest businesses.
In our view the current push by large organizations (C.D. Howe Institute, Globe and Mail, KPMG, and others) toward lower personal and corporate income taxes paired with higher GST/HST reflects a long‑standing policy preference among Canada’s largest firms and the think tanks aligned with them. The evidence shows that this agenda is not neutral: it structurally favours large, capital‑rich corporations over small firms and households, and it is not guaranteed to improve investment or productivity.
Below is a structured, and evidence‑based response, a breakdown of what’s happening, and what the data actually supports in our view.
Core takeaway
Canada’s large-business policy ecosystem is promoting a shift toward higher consumption taxes and lower income taxes — but the evidence does not support the claim that this will meaningfully boost investment or productivity. For small firms and households, the shift is regressive, adds complexity, and risks undermining one of Canada’s strongest competitive advantages: the Small Business Deduction (SBD).
1. What the major institutions are arguing
C.D. Howe Institute
Recent C.D. Howe publications explicitly advocate for a tax‑mix shift:
- Increase GST by 2 percentage points
- Reduce federal corporate tax rates by 2 percentage points
- Reduce middle‑income PIT rates
Their broader “Big Bang” reform proposes even more aggressive corporate tax cuts (10% “Irish‑style” rate or a distributed-profits tax).
Globe and Mail — “The Tax Tradeoff”
The Globe’s reporting frames Canada as “high tax, low productivity,” and heavily features arguments from business lobbyists and tax consultants.
We point out that Matt Lundy is not an economist or tax practitioner, and the series largely amplifies the think‑tank narrative rather than interrogating it.
KPMG and other large firms
Large accounting firms consistently support:
- Lower corporate tax rates
- Simplified corporate tax structures
- Reduced reliance on income taxes
- Increased GST/HST paired with targeted credits
This aligns with the interests of multinational clients who benefit from lower statutory rates and simpler cross-border tax planning.
2. Why large organizations prefer GST increases
A. GST is regressive but predictable
Consumption taxes hit lower‑income households harder, but they are stable, easy to administer, and harder to avoid.
B. Large firms benefit more from lower corporate taxes
Lower corporate tax rates:
- Increase after‑tax profits
- Improve multinational tax planning flexibility
- Reduce incentives for profit shifting
- Increase shareholder distributions
Small firms, however, already benefit from the SBD, which gives them 11–13% effective rates — among the lowest in the OECD.
C. GST credits add complexity for small businesses
C.D. Howe’s own GST memo acknowledges that expanding GST credits is costly and complex, yet they still support GST increases because broad exemptions “risk federal finances.” This contradicts the claim that GST‑based reform “simplifies” the system.
3. The “dead money” problem — why corporate tax cuts didn’t work last time
Between 2000 and 2009, Canada cut federal corporate tax rates from 28% to 15%. Mark Carney famously warned that firms were sitting on “dead money” — retained earnings not being invested productively.
This is crucial: Corporate tax cuts did not produce the investment boom promised. Instead, firms accumulated cash, increased dividends, and engaged in share buybacks.
The same think tanks now argue that more corporate tax cuts will fix productivity — despite evidence to the contrary.
4. Canada is already competitive
- Canada’s combined corporate tax rate (~26–27%) is middle of the G7.
- For small businesses, Canada is one of the most competitive jurisdictions in the OECD due to the SBD.
- The integration system reduces double taxation.
- Healthcare is not employer‑funded, reducing business costs relative to the U.S.- think tanks ignore this reality when comparing corporate tax rates.
Large organizations often ignore these structural advantages because they are focused on statutory headline rates, not effective rates or total cost structures.
5. The real risk: undermining the Small Business Deduction
Large organizations frequently argue that the SBD:
- Creates complexity
- Distorts investment decisions
- Encourages firms to stay small
But their preferred solution — eliminating the SBD and lowering general corporate rates — would:
- Increase taxes on small firms
- Reduce Canada’s competitive advantage for entrepreneurship
- Shift benefits toward large corporations
- Require more GST/HST credits to offset regressivity
- Increase administrative burden for micro‑firms
This is the opposite of simplification. Canada’s consumption taxes add complexity for our smallest businesses. For example, one of my corporate tax clients was invoiced for services from a Quebec supplier. Their combined consumption tax (included Quebec QST of 9.975%). Dealing with Revenu Québec seemed intended to frustrate the ability to recover QST. The result was that about $24,000 of input tax credits remains trapped in Québec Provincial coffers..
6. A more balanced alternative: targeted investment incentives
In our view targeted measures for productive investment – such as accelerated depreciation for machinery and equipment are actually supported by empirical evidence. Canada’s 20 largest firms are heavily skewed to regulated industries (banking and telecoms), foreign and family-controlled retail, and even our Big 4 audit oligopolies. We should be encouraging more investment in resource processing, instead repeating the ‘dead money’ mistakes of the first decade of this century.
The Carney government is already proposing a mega deduction for qualifying investments in machinery and equipment!
Better options include:
- Investment tax credits for automation, R&D, and clean tech
- Direct support for scale‑up firms
- Extending SR&ED for defense and resource processing technologies
- Measures that reward actual investment, not passive profit retention
These tools encourage productivity without shifting the tax burden onto households.
Bottom line
The current push for GST‑for‑income‑tax swaps is not a neutral technocratic proposal — it reflects the interests of large firms and the think tanks aligned with them.
Canada’s tax competitiveness problem is not corporate tax rates. It is:
- weak investment incentives
- slow adoption of productivity‑enhancing technologies
- structural barriers to scale‑up
- underinvestment in R&D
- and a policy ecosystem dominated by large‑firm perspectives
Shifting the tax burden onto consumption will not solve these issues — and risks harming small businesses, households, and Canada’s long‑term competitiveness.
