While Canada stands in the middle of the pack internationally in terms of tax competitiveness, we rely more heavily on raising government revenues through income taxes at the federal and provincial levels and property taxes at the local level than most industrialized countries. On the flip side, Canada's reliance on consumption-based taxes and levies is relatively low compared to our international competitors other than Mexico and the United States.
Although there is a good case to be made that income and property taxes must remain a fundamental part of the funding equation in Canada, we support a re-balancing of the revenue mix toward greater use of consumption-based levies, such as user fees. Often in Canada, there is little effort put to aligning the price of services toward the full marginal cost of delivery (including capital replacement and environmental impacts). Although consumption-based levies are the most efficient revenue generator, they are also regressive. Nonetheless, there is significant potential to increase their usage in areas where there are no overriding equity concerns and where consumption can be accurately measured. Water, sewers, electricity and garbage collection all satisfy this requirement. Above all - in stark contrast to trends sweeping the globe - Canada has taken little advantage of utilizing tolls for the purposes of funding roads, highways and bridges.