“We Need to be More Competitive”: Why Tax Reform is Critical to Canada's Future

January 13, 2026

In a global economy driven by intense competition for entrepreneurship, investment and talent, Canada is still losing ground.

While recent revisions to GDP showed stronger productivity growth than expected, the country’s economic forecast continues to worsen as external pressures from U.S. tariffs and geopolitical uncertainty mount.

To attract investment and make Canada more competitive, tax reform is an absolute necessity. The 2025 federal budget took some positive steps in the right direction, but Canada needs to be bolder.

At a recent Insights Speaker Series event, CPA Ontario invited John Ruffolo, FCPA, FCA, Founder, Maverix Private Equity; John McKenzie, FCPA, FCMA, CEO, TMX Group; and Carol Wilding, FCPA, FCA, ICD.D, President & CEO, CPA Ontario for an open and frank conversation about the Canadian tax system. Moderated by Amanda Lang, CTV News’ Chief Financial Correspondent, they discussed how Canada can pivot our tax system from a barrier to economic growth, to a driver.

Here's what they told us:

The Broken Tax Mix

The more you tax something, the less you get of it. At a time when Canada desperately needs investment, entrepreneurship and talent, our tax system relies disproportionately on personal and corporate income taxes. Combined federal and provincial rates now push past 50% at the top marginal personal income tax threshold, incentivising highly skilled workers to relocate.

“We must look at our tax system through the lens of growth, prosperity and competitiveness,” said Carol Wilding. “How do we attract talent and attract capital? We're above 50% at the highest marginal rate threshold... we're pushing talent away,"

High personal income taxes make Canada uncompetitive in the global market for talent in high-demand and mobile sectors, like finance and tech. The fact that Canada relies more on harmful taxes, like income and profit taxes, than peer countries compounds the problem. The solution requires a shift in the way that Canada raises tax revenue, reducing reliance on taxes that discourage productive activity, and moving toward more efficient revenue sources, like consumption taxes.

“It’s hard to do politically,” added Carol. “It will have to be done thoughtfully and responsibly, with targeted transfers and credits. But if there is ever a time to do it, this is the time.”

Unleashing Capital Investment

Canada is facing a capital crisis. John Ruffolo framed the challenge bluntly: “Here is the fundamental issue staring us in the face: we have a capital formation issue. There aren’t available dollars to invest in risk-based assets.”

“No problem, we will attract foreign capital,” Ruffolo continued. “But here is the rub. Every country including the U.S. is trying to pull their own sovereign capital into their own economy.”

“How does capital flow? It’s water…and it flows to the areas where there is the least resistance,” said John McKenzie.

Canada's combined general corporate income tax rate exceeds both the OECD and U.S. averages, directly influencing where businesses invest.

The speakers called for fundamental shifts. John McKenzie stressed a key principle "Let's not have the government pick what's a really good capital investment and what's a less good capital investment.”

John Ruffolo championed Estonia’s distributed profits model, which allows corporations to pay no income tax on earnings that are reinvested in the business; taxes apply only when profits are distributed to shareholders.

The panel discussed how tax reform can support entrepreneurs and venture investment through mechanisms like capital gains rollovers, allowing investors to defer taxes by reinvesting proceeds into qualified Canadian businesses.

Protecting Canadian Intellectual Property

The panel dug into the problem of keeping Canadian intellectual property in Canada.

Both John Ruffolo and Carol Wilding advocated for the introduction of a patent box regime, a preferential corporate tax rate for income derived from Canadian-owned intellectual property.

“The whole idea of a patent box regime is that if Canadian IP is developed here, then you’re going to get preferential corporate tax in order to keep that here, so we get the economic value.” explained Wilding.

Canadian innovations are developed here but commercialized elsewhere. Tax reform would encourage Canadian companies to keep the economic benefits of scaling that innovation in Canada.

Canada’s Path Forward

While the recent federal budget took some positive steps, the panel was unanimous: anything short of comprehensive, first-principles reform of Canada’s tax system will fail to make the necessary changes.

When asked about the single most important reform for productivity, John Ruffolo responded: "Anything that we do from a taxation perspective to increase the availability of capital into risk-based assets... that will at least help us get back onto the right trajectory."

A competitive tax system is not optional; it is a key lever for improving Canada’s economic performance. The question now is whether Canada will act with the urgency this moment demands.

Watch the Full Event On-Demand