Report Shows Canadians Pay Higher Income Tax Rates Compared to Workers in Most Other OECD Nations
Canadians across all income levels pay more taxes than residents in most other countries in the OECD, as per a recent report.
“In 2022 (latest year of available international data), Canada had the 5th highest combined top tax rate out of 38 countries,” the report stated. “This indicates that while Canada’s top tax rate was more competitive than in four countries, it was uncompetitive compared to most OECD countries including the United States, the United Kingdom, and other English-speaking countries like Australia.”
Countries ranking higher than Canada for tax rates in the OECD were Japan, Denmark, France, and Austria.
According to the report, five Canadian provinces were among the top 10 spots for the highest tax rates in the OECD. These provinces include Newfoundland and Labrador at 54.80 percent, Nova Scotia at 54 percent, Ontario at 53.53 percent, British Columbia at 53.50 percent, and Quebec at 53.31 percent.
Prince Edward Island fell in the top 15 with 51.37 percent, while Manitoba (51.40 percent), Alberta (48 percent), and Saskatchewan (47.50 percent) were in the “middle range.” These tax rates were higher than those in the United States (43.30 percent) and the United Kingdom (45 percent).
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Authors Jake Fuss and Grady Munro stated that high income tax rates hinder Canada’s ability to attract workers and discourage people from reaching higher incomes.
stated Mr. Fuss in an April 9 release.
The authors argued that Canadians who are “given the opportunity to work more and earn more labour income are discouraged from doing so when a significant portion of their increased income is consumed by taxes.”
“If policymakers want to attract and retain skilled workers and job creators, and encourage entrepreneurs, we must lower personal income tax rates and avoid higher rates at all costs,” Mr. Munro said in the statement.
It’s not just high-income earners that face higher tax rates, the authors found.
“Canada’s marginal tax rates are also uncompetitive at incomes of CA$75,000 and CA$50,000,” the authors wrote.
Authors Mr. Fuss and Grady Munroe mentioned that governments are seeking to increase revenues, but continually raising taxes could have unintended consequences as taxpayers seek ways to save.
stated they pay too much tax, according to an Ipsos poll released in July 2023. While 39 percent said they pay too much, 29 percent said income tax was “much too high.” Only one percent said tax rates were too low.
The survey also revealed that 55 percent of Canadians think the government spends too much money, while 27 percent said government spending was at an appropriate level. Eight percent of respondents said spending was too low.
announced changes in November 2023, stating it would be using an inflation rate of 4.7 for tax brackets in 2024.
The changes include an increase in Canada Pension Plan contributions as well as Employment Insurance or EI deductions. The government is also introducing a second CPP tax, called CPP2, which applies to those earning between $68,500 and $73,200.
Matthew Horwood and Jennifer Cowan contributed to this report.
