Ten Tax Myths
P R É C. S O M M A I R E S U I V.

Myth 2
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.

Table 2.1 Tax Revenue as a share of GDP, 1996

Personal Income TaxCorporate Income Tax Social SecurityTaxes on Goods and Services Other TaxesTotal Tax Revenue
Canada13.93.35.9 9.14.636.8
United States10.72.76.7 4.93.528.5
European Union11.03.211.2 13.33.742.4
OECD average10.13.18.4 12.33.837.7
Source: OECD Revenue Statistics, 1965-1996.

Table 2.2
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)
New Zealand35.833.033.083.8
OECD Average37.747.835.185.1
Source: OECD in Figures, 1998.

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.

[4] Eric Beauchesne, “Canadian tax load same as US”, Vancouver Sun, May 26, 1999.

Ten Tax Myths
P R É C. S O M M A I R E S U I V.