|We have one of the highest tax rates among the 29 countries in the OECD — the Organization for Economic Cooperation and Development — and the G-7
T his allegation has been repeated over and over
again by business representatives and conservative
media pundits, to the point that it is now the conventional
wisdom. While it shows that business
thinks it appropriate to compare Canada to other
OECD countries, the claim itself is completely false —
and always has been. As Table 2.2 illustrates, Canada
places very close to the middle of the OECD countries,
no matter what kind of tax is compared — a
ranking that has been steady for many years. If we
compare ourselves to European countries, we collect
a lower percentage of our GDP in tax revenue.
Source: OECD Revenue Statistics, 1965-1996.
Tax Revenue as a share of GDP, 1996
|Personal Income Tax||Corporate Income Tax
||Social Security||Taxes on Goods and Services
||Other Taxes||Total Tax Revenue
Source: OECD in Figures, 1998.
How Canada Compares Internationally (1996)
|Total Taxes (% of GDP)
||Highest Personal Income Tax Rate
||Lowest Personal Income Tax Rate
||Average Disposable Income (% of gross pay)
- The OECD’s 1998 report (based mostly on 1996
figures) shows that Canada’s total tax revenue
equals 36.8% of its GDP. That’s just below the average
for the entire OECD, but below the European
average of 42.4%. Fourteen countries collected
more than Canada, and 14 countries, including
the U.S., collected less.
- As a share of GDP, Canada collected a higher portion
of its total tax revenue from individuals than
the OECD average: 13.9% compared with 10.1%. This
means that Canada relies more on the personal
income tax system for its revenues, and less on
regressive levies like sales taxes and social security
- Our payroll taxes — e.g., UI and Canada Pension
Plan contributions — are about 25% less than the
OECD average, and are the lowest of any of the
- Canada collects less of its revenue from taxes on
goods and services — provincial sales tax, the GST,
gasoline, liquor and tobacco taxes — than the
OECD average, 9.1% versus 12.3%. Of the G-7 countries,
only the U.S. and Japan collect less.
- The OECD figures do not take into account
Canada’s public investments in health and education.
A study by Standard and Poors DRI found
that, “[o]nce private medical and education expenditures
are added to total government receipts,
the difference between Canada and the
United States disappears.”.
- In terms of high marginal tax rates on individuals,
Canada again places close to the middle, with
10 countries having higher marginal rates on high
income earners. The OECD only measures taxes
on income, not wealth, and thus does not take
into account inheritance taxes which all but three
OECD countries impose on upper-income individuals.
About half of these countries also have
a yearly tax on net worth. Canada has neither of
these taxes, and as a result our mid-range marginal
income tax rate actually exaggerates the tax
burden placed on high-income earners because
their accumulated wealth is never taxed.
- Disposable income after taxes is a good measure
of the tax paid by individuals. Measuring this figure
for a family with two children, Canada’s average
disposable income is 81.8% of total income.
Again, this is just slightly below the OECD average
of 85.1%, and higher than the U.S. Fifteen
countries have a higher disposable income as a
percentage of total income, and 13 have lower.
While these OECD figures are useful to know,
given the frequent repetition of this tax myth, they
are not particularly meaningful unless we also compare
what we get for those taxes. For example, while
our governments collect a higher portion of GDP than
does the U.S., we get a great deal more in government
services, most significantly universal, publicly-funded
Medicare. Americans pay an enormous amount for their profit-oriented
medical care system (whose overall per capita cost is 50% higher than
ours to account for the high administrative costs and the profits being made).
The same is true of education, although Canada
is headed in the wrong direction in education spending.
A meaningful comparison of taxes paid would
add the costs of Medicare to the average American
family’s tax bill.
We pay less in taxes as a percentage of GDP than
do people in most European countries, but they in
turn enjoy social programs of far greater generosity
and comprehensiveness for their higher taxes. Most
of the more developed countries in Europe have social
programs that Canadians can only dream of:
universal, publicly-funded child care; maternity
leave with full or nearly full pay for all working mothers;
weeks of legislated time off to care for sick children;
up to twice the number of weeks of paid vacation;
well-funded universities with low or no (as in
Britain, even under Thatcher) tuition fees. Our UI
program now ranks below even that of the U.S., and
is one of the most miserly of the OECD countries.
 Eric Beauchesne, “Canadian tax load same as US”,
Vancouver Sun, May 26, 1999.