Once, it was important for countries to collect taxes, to have their people review forms and deposit cheques. But that’s so 20th century.
So, there’s nothing wrong, in principle, with the Conservatives supporting the idea that Quebec’s revenue agency should collect federal income taxes in the province. That alone won’t, as some fear, weaken Canada.
But the tricky question isn’t who collects income taxes so much as who decides what income is taxed. That’s a question that will matter in the 21st century.
Conservative Party Leader Andrew Scheer’s endorsement of a simple idea – allowing Quebeckers to fill out one income-tax form rather than two – is likely to end up mired in the more consequential question of who defines taxable income.
Ottawa collects income taxes for nine out of 10 provinces. But Quebec has been collecting its own income taxes since then-premier Maurice Duplessis instituted provincial income taxes in 1954. Quebeckers get two income-tax slips and fill out two tax forms every year.
Recently, Quebec’s government took up an idea that had been floated for years. They called for Quebec to collect federal income taxes in the province, too, with a single tax form. On Monday, Mr. Scheer formally endorsed the idea. Quebec Conservative MP Gérard Deltell said it grew from a classically conservative impulse. “It’s to simplify citizens’ lives,” he said.
That’s a good impulse. You can see why the idea has a political appeal, too. If you’re a Quebecker who thinks taxes are too high, bureaucracy too burdensome and Ottawa too bossy – and that’s a description of the Conservatives’ target market – you’d rather fill out a single tax form and send it to Quebec City. While Prime Minister Justin Trudeau rejected the idea, Mr. Scheer’s position expresses a flexible attitude to Quebec. A few people may even believe they’ll only pay half the taxes.
It’s not likely to be popular in the rest of Canada. Collecting taxes has long been thought of as something countries do. At one time, a country had to have tax collectors and a postmaster to be considered a country.
But really, who cares now who collects or mails cheques? It’s not like Quebec could refuse to hand the money over – Ottawa would simply hold back transfer payments and get back in the tax-collection business. Quebec already collects the GST.
The real problem in this dance is who gets to lead.
In the other nine provinces, Ottawa doesn’t just collect taxes. It sets the definition of taxable income that is used for both federal and provincial taxes. If Ottawa adds a new deduction, provinces have to change, too.
That doesn’t mean provinces don’t have any control over provincial taxes. They can raise or lower tax rates. They can adjust tax credits. But all nine work from the same baseline – the rules for taxable income set by Ottawa. Except Quebec.
But if there’s going to be a single tax form in Quebec for both federal and provincial taxes, it will presumably have to use one definition of taxable income. Who decides on that definition: Ottawa or Quebec?
In Mr. Deltell’s view, that will be decided in negotiations. But it’s the starting point, not a detail.
If Quebec gets to decide what constitutes taxable income for both provincial and federal income taxes, the definition of taxable income for federal taxes would be different for Quebec residents. Anytime Quebec changed deductions, Ottawa would have to follow its lead.
Quebec could ask to negotiate the definition, but presumably other provinces would want to join in. And then it would be very hard to renegotiate the rules later.
There is another option. Quebec could collect using Ottawa’s definition of what’s taxable. That’s essentially what Quebec did when it started collecting the GST. Quebec has increasingly been harmonizing its income-tax system with Ottawa’s. But it’s hard to imagine Quebec’s goal is to cede its existing control of tax policy to Ottawa, all for the joy of collecting federal taxes.
One consolation is that filing two tax forms isn’t as hard as it was in the 20th century, now that software and e-filing lessen the load. It no longer really matters who does the collecting, either. But who controls the rules – that tricky jurisdictional question will complicate this simple idea.
Campbell Clark